Sunk Cost Fallacy
The economic fallacy where a cost that has already been incurred and cannot be recovered (sunk cost) is tempted to be made nonetheless despite that it misallocates resources by depending on information that is irrelevant to the decision being made.
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Origin
The proverb “in for a penny, in for a pound” captures the intuition, but the formal concept emerged from microeconomic theory. Richard Thaler’s influential work described how people irrationally factor in past sunk costs when deciding future actions. Kahneman and Tversky’s prospect theory (1979) helped explain why: losses loom larger than gains, making it psychologically painful to “waste” what’s already spent.
Updated February 22, 2026