I was having a conversation with a colleague regarding sunk costs, and discussion came up that the appeal of falling for the sunk cost fallacy might be a feature rather than a flaw, as it is behavior that appears to be very common and very persistent across generations. I'd argue, just looking at the world as I see it, most individuals fall for the sunk cost fallacy, and it doesn't seem to give a serious disadvantage over time

I'm aware of the literature regarding sunk costs and memory. I'm curious about any thoughts you all may have.

Thank you!


Very interesting question.
To answer the direct question in the title, I'd say I'd have to break the sunk cost fallacy into two arenas. In the first I'd say it is a feature not a bug, but in the second, vice versa.

As a means to keep a business from dying before it's been given opportunity to profit.

I think that the sunk cost fallacy is still a double edged sword, I think that it may serve to keep businesses alive longer than they should, but I also believe that it at times keeps businesses alive long enough to see a return. Most small business owners I know, successful or not, have fallen victim to the underlying logic- for good or bad. In that way I do not consider it bad or good, I just see it as a feature of the economy, especially local economies.

As a flaw in the human psyche taken advantage of by MLM schemes, Casinos, numbers games and similar enterprises.

I believe that in these cases, it becomes a bug, not a feature. A terrible flaw that extracts great amounts of wealth from those of us who are vulnerable, intoxicated (not necessarily by narcotics, but by grand promises to we who are not in a secure position), and caught off guard. That's not to take responsibility away from our choices. I just think that most people, after being had as a result of falling into the trap of this logic, feel angry at themselves not in the way that Bismark might have felt after making a strategic error (which is what I have seen from business owners), but closer to the way that Heracles felt after murdering his own children. I stayed at the Cosmopolitan in Vegas recently, and noted that my room was one of the few with balconies that I could see anywhere on the strip. W Therefew balcony rooms in Vegas for a reason.
Just my raw thoughts on the subject and are mostly anecdotal, this is the first time I've considered the sunken cost fallacy in this light.

  • $\begingroup$ Thank you for the perspective! I'm going to think about it and follow-up . $\endgroup$
    – Hessian
    Nov 8 '18 at 23:41
  • $\begingroup$ No problem @Hessian.<br/> I should mention though, that while I don't have the necessary permissions in economics to comment this in the appropriate place, (this is a new account), you might want to try to reformat description to be more in line with title. The last sentence makes it feel like a discussion prompt, so I'm not sure if an answer can be accepted. $\endgroup$
    – user20097
    Nov 9 '18 at 1:05

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