Concept · Cognitive Bias: Economic and consumer biases
Sunk cost fallacy
Origin: Thaler, 1980; Arkes & Blumer, 1985
The Biological Bridge
This business construct is human-invented, but the outcome it's trying to achieve has deep biological roots.
Surface Construct
Continuing investment because of past investment rather than future returns
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Underlying Outcome
Persistence signals commitment; abandonment signals unreliability
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Biological Mechanism
Commitment signaling. In social species, abandoning investments signals you're an unreliable partner. A bird that abandons a nest after investing 80% of incubation time is revealing itself as a poor co-parent. The 'fallacy' is actually a reputation mechanism - it demonstrates you'll follow through despite setbacks.
Key Insight: Sunk cost 'fallacy' may be a feature in iterated social games where reputation matters. It's only a fallacy in one-shot anonymous decisions.
The Full Picture
Parent birds sometimes abandon nests after investing weeks of incubation if a predator discovers the location—they don't throw good effort after bad. Natural selection ruthlessly punishes organisms that honor sunk costs over future prospects. When food patches deplete, foragers leave immediately regardless of prior investment; when territories become indefensible, animals retreat. Biology has no sentimental attachment to past expenditures because fitness is measured in future offspring, not historical effort.