Part of the Business terms glossary:

The sunk cost effect is the tendency for humans to continue investing in something that clearly isn’t working.

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Because it is human nature to want to avoid failure, people will often continue spending time, effort or money to try and fix what isn’t working instead of cutting their losses and moving on. This tendency, which is known as the sunk cost effect, can be illustrated by the adage “throwing good money after bad.”

In nature, the sunk cost effect is known as the Concorde effect. 

This was last updated in March 2013
Posted by: Margaret Rouse

Related Terms

Definitions

  • sunk cost (SC)

    - A sunk cost is money that has already been spent and cannot be recovered. Logic dictates that because sunk costs will not change -- no matter what actions are taken -- they should not play a role i... (SearchCIO.com)

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