SUNK-COST FALLACY
Charles François (2004). SUNK-COST FALLACY, International Encyclopedia of Systems and Cybernetics, 2(2): 3263.
| Collection | International Encyclopedia of Systems and Cybernetics |
|---|---|
| Year | 2004 |
| Vol. (num.) | 2(2) |
| ID | ◀ 3263 ▶ |
| Object type | Discipline oriented, General information |
- “The human tendency to judge options according to the size of previous investments rather than the size of the expected return” (P. AYTON & H. ARKES, 1998, p.40)
The authors state: “Truly rational choices would be made only after weighing up future costs and benefits. Past costs and benefits are quite irrelevant” (Ibid)
To let oneself into the sunk-cost fallacy leads to “throw good money after bad”, i.e. to transform a still available resource into into a highly probable loss.
This behavior can easily be observed in the stock market. It was also the irrationality that dominated the Vietnam war and led to this tremendous fiasco.