When deciding whether to continue, only consider future investments and future returns — not what has already been invested
Grade BMedium benefitTimeFreeLittle timeSome willpower
Money and time already spent make people more inclined to keep going. Across 98 datasets, this tendency remains consistent. Therefore, when deciding whether to continue, only factor in future investments and expected returns; past expenditures should be excluded from consideration.
- Cost
- No cost involved. The difficulty lies in accepting that time already invested cannot be recovered.
- Benefit
- Prior investments of money, effort, and time increase the likelihood of continued engagement. This is known as the sunk cost effect in psychology. Analysis of 98 datasets confirms this tendency is stable. Avoiding this bias prevents people from continuing to invest time solely to avoid “wasting” what they have already spent.
- Notes
- This is exactly what Arkes and Blumer demonstrated in their theater experiment. The Ohio University Theater sold season tickets at three price points: full price ($15), $13, and $8. In the first half of the season, ticket holders who paid full price attended an average of 4.11 shows, compared to 3.32 and 3.29 shows for the other two groups. No significant differences emerged between the groups in the second half of the season. Roth and colleagues found this effect diminishes over time and is less pronounced among older individuals.
Sources · 2
- Arkes, H. R., & Blumer, C. (1985). The psychology of sunk cost. Organizational Behavior and Human Decision Processes, 35, 124–140. doi.org/10.1016/0749-5978(85)90049-4
- Roth, S., Robbert, T., & Straus, L. (2015). On the sunk-cost effect in economic decision-making: A meta-analytic review. Business Research, 8(1), 99–138. doi.org/10.1007/s40685-014-0014-8