Hal Arkes and Catherine Blumer created an experiment in 1985 which demonstrated your tendency to go fuzzy when sunk costs come along. They asked subjects to assume they had spent $100 on a ticket for a ski trip in Michigan, but soon after found a better ski trip in Wisconsin for $50 and bought a ticket for this trip too. They then asked the people in the study to imagine they learned the two trips overlapped and the tickets couldn’t be refunded or resold. Which one do you think they chose, the $100 good vacation, or the $50 great one?
Over half of the people in the study went with the more expensive trip. It may not have promised to be as fun, but the loss seemed greater. That’s the fallacy at work, because the money is gone no matter what. You can’t get it back. The fallacy prevents you from realizing the best choice is to do whatever promises the better experience in the future, not which negates the feeling of loss in the past.
