Cognitive biases & decision-making · law 069
Sunk Cost Fallacy
Also known as: Concorde fallacy
By Shivam Bhandari · Reviewed 31 October 2026 · How we write
what it means
People keep investing in a failing project because of what they have already spent, rather than what it will cost from here.
How Sunk Cost Fallacy works
Money, time, and effort already spent cannot be recovered. Rational decisions should only look at future costs and benefits. But losing what we have invested feels painful, so we throw good money after bad.
Businesses fall into it with failing products, bad hires, underperforming branches, and long software projects.
where it comes from
Studied by Hal Arkes and Catherine Blumer in 1985, including an experiment where people chose a less enjoyable ski trip because they had paid more for it. The Anglo-French Concorde jet is the classic business example.
Sunk Cost Fallacy examples in business
Products
A company keeps funding a product line for three more years ‘because we've already spent ₹2 crore on it’.
Hires
A manager keeps an underperformer because of the time invested in training them.
Projects
Governments and companies continue overrunning projects because stopping would ‘waste’ past spending.
How to apply it
- 1When reviewing a project, ignore past spend and ask: knowing what I know now, would I start this today?
- 2Set clear kill criteria at the start of projects.
- 3Review major investments at fixed checkpoints.
- 4Reward teams for stopping bad projects early.
common misreading
It doesn't mean quitting at the first difficulty — only that past costs shouldn't drive future decisions.
ask yourself
What are you continuing mainly because of what you have already put into it?
put it into practice
Frequently asked questions
What is Sunk Cost Fallacy?
People keep investing in a failing project because of what they have already spent, rather than what it will cost from here. Money, time, and effort already spent cannot be recovered. Rational decisions should only look at future costs and benefits. But losing what we have invested feels painful, so we throw good money after bad.
Who came up with Sunk Cost Fallacy?
Studied by Hal Arkes and Catherine Blumer in 1985, including an experiment where people chose a less enjoyable ski trip because they had paid more for it. The Anglo-French Concorde jet is the classic business example.
How do you apply Sunk Cost Fallacy in business?
1. When reviewing a project, ignore past spend and ask: knowing what I know now, would I start this today? 2. Set clear kill criteria at the start of projects. 3. Review major investments at fixed checkpoints. 4. Reward teams for stopping bad projects early.
What is a common misunderstanding of Sunk Cost Fallacy?
It doesn't mean quitting at the first difficulty — only that past costs shouldn't drive future decisions.