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  • Writer's pictureDeric Hollings

Sunk-Cost Fallacy

Updated: Oct 15, 2023


Beliefs and their impact


Have you ever been excited to do something that ultimately wasn’t helpful or healthy for you? If so, are you aware of how your behavior may be impacted by your beliefs?


Herein, I’ll briefly discuss a belief-consequence connection that may help you to better understand why you behave as you do when your conduct doesn’t serve your best interests—even when what you’re doing relates to joy. Consider the following scenario:


You’re sitting at a slot machine, depositing dollar bill after bill in hopes of winning big. Minutes turn into hours and you’ve spent somewhere in the neighborhood of $200.


Originally, you told yourself that your limit was $50. If you hadn’t hit the payoff at that point, you were done. Now, $150 past your initial financial boundary, you’re still feeding money into the machine.


You reason, “I’m already $200 in, so I may as well just keep going. If I win, I’ll probably win big!” You’re excitedly joyous. Bill after bill, with several trips to renew your cash supply, you deposit your hard-earned money into the slot machine.


Meanwhile, and though you may be unaware of this information, you’re holding your breath for longer than usual, your heartrate is accelerated, your pupils are dilated, and your legs are shaking vigorously.


Here, I’ve described emotion, bodily sensations, and behavior associated with the influence of dopamine on your system. Contrary to what many people may believe, the slot machine (stimulus or Action) isn’t what produces the reaction (response or Consequence).


There is no Action-Consequence (A-C) connection at play here. Rather, there is a Belief-Consequence (B-C) connection that explains how dopamine impacts you and the associated response described in the scenario.


From a Rational Emotive Behavior Therapy (REBT) perspective, the ABC Model illustrates that it isn’t an Action that leads to a Consequence, though it’s one’s Belief about an occurrence that produces a reaction. Often, this B-C connection manifests in self-disturbance—though not always.


Sometimes, we can experience joy, excitement, or pleasure as a result of what we tell ourselves about events. However, even if our mood is lively as a result of a B-C connection, we may not appreciate the aftereffects of our behavior.


For instance, it may be exciting for some people to engage in a road rage incident. The same emotions, sensations, and behaviors described in the slot machine scenario may be present when chasing down another motorist in traffic.


This sort of behavior may lead to dire outcomes. Rather than deceiving ourselves into believing that an A-C connection is responsible for one’s experience at a slot machine or on the roadway, REBT focuses on personal ownership of one’s beliefs which cause consequences.


One element worthy of focus herein is dopamine. Some people seem to think this chemical is responsible for their conduct.


Though it may seem antithetical to current understanding, an exciting dopamine-fueled experience doesn’t occur when receiving what you want—such as a slot payout or forcibly extracting someone from a car. Rather, dopamine works in anticipation of getting what you want.


According to one source, “[D]opaminergic dysfunctions toward anticipated rewards, rather than actual rewards, reinforce gambling behavior among gambling disorder sufferers.” As such, the slot machine (stimulus) doesn’t produce a reaction (response).


It is one’s belief about a reward—in the aforementioned example, winning at the slot machine—that results in the consequence. We can trigger dopamine release with our thoughts and beliefs.


This may be an exhilarating experience. Though exciting, the behavior of a person who goes well beyond one’s personal boundaries—paying a steep cost—can have a detrimental impact on an individual’s quality of life.


Sunk-cost fallacy


Having addressed the belief-consequence connection, I now turn towards the “cost” element of a cost-benefit analysis. For the sake of clarity, when addressing cost, I’m referring to the amount of resources (i.e., time, money, emotion, etc.) spent in order to obtain something.


For the person who is willing to bear the cost of overspending at a slot machine, there is a well-established logical fallacy (also referred to as a cognitive bias in some cases) that may explain such behavior. By fallacy, I mean an irrational belief that is based on unsound argument.


Are you aware of sunk-cost fallacy? Per one source, this occurs when “[r]easoning that further investment is warranted on the fact that the resources already invested will be lost otherwise, not taking into consideration the overall losses involved in the further investment.”


Regarding the earlier scenario, a person at the slot machine uses irrational thinking by concluding, “I’m already $200 in, so I may as well just keep going. If I win, I’ll probably win big!” Here, use of the word “just” serves as justification for the person’s behavior.


The individual’s healthy boundary was to stop playing slots once $50 was spent. Any amount over that limit constitutes a loss. As such, the cost of behaving in a manner that is contrary to the person’s interests may result in debt, as well as unpleasant emotional and bodily sensations.


Per a separate source, “This perceived sunk cost makes it difficult to walk away from the situation since you don’t want to see your resources wasted.” From an REBT approach, I emphasize the desire aspect that leads to disturbance.


The slot machine doesn’t cause one’s craving or outcome. Rather, one’s belief about a desired outcome relates to when the sunk-cost fallacy is utilized. For example, telling oneself, “I’ll probably win big” if continuing to deposit dollar bills into a slot machine.


In and of itself, there’s nothing wrong, bad, or unhealthy with wanting to win. What makes the difference in regards to a cost-benefit analysis is the impact of one’s behavior in association to a self-disturbing belief.


Suppose the person in the scenario says, “I must win at all cost, because it would be awful if I didn’t, and I don’t think I could stand to lose!” Would you consider this belief correct, good, or healthy?


Addressing how to remedy this issue, one source suggests that “if we are aware of the sunk cost fallacy, we can try to ensure we are focusing on current and future costs and benefits instead of past commitments.” What does this look like for the person in our scenario?


Rather than reflecting about how $50, $100, $150, or even $200 has already been invested into the slot machine, the individual can unconditionally accept that the past cannot be changed. Without this form of acceptance, the person will likely form additional self-disturbing beliefs.


Each of us is a fallible human being. We all make mistakes. Admitting this isn’t a copout. Instead, it’s a fundamental truth.


Additionally, the individual can focus on the present and consider how improved behavior may serve the person in the future. A mistake in the past with behavior modification in the present can significantly enhance the future.


One may say, “I can’t undo what has already been done, though I can make a change in this moment. I don’t want to lose more money, so I will walk away from the slot machine.”


We don’t need to deceive ourselves into valuing irrational beliefs, such as those associated with the sunk-cost fallacy. We have a choice in the matter. You can alter your outcome by adopting new and more effective beliefs.


Conclusion


Understanding that our beliefs influence consequences—even the fact that we can trigger dopamine release with the nonsense we tell ourselves—is an integral step towards addressing the sunk-cost fallacy. It simply isn’t true that we must remain at a slot machine if doing so isn’t in alignment with our goals and interests.


The sunk-cost fallacy can apply to gambling, overeating, consumption of substances, infidelity, road rage, and many other actions during which people disturb themselves with beliefs. Thankfully, you have the ability to interrupt the ABC chain of events.


Have you ever experienced an exciting event and concluded that you were a victim of circumstance? Would you like to know more about how to disrupt the B-C connection so that you can improve your life? I may be able to help.


If you’re looking for a provider who works to help you understand how thinking impacts physical, mental, emotional, and behavioral elements of your life, I invite you to reach out today by using the contact widget on my website.


As a psychotherapist, I’m pleased to help people with an assortment of issues ranging from anger (hostility, rage, and aggression) to relational issues, adjustment matters, trauma experience, justice involvement, attention-deficit hyperactivity disorder, anxiety and depression, and other mood or personality-related matters.


At Hollings Therapy, LLC, serving all of Texas, I aim to treat clients with dignity and respect while offering a multi-lensed approach to the practice of psychotherapy and life coaching. My mission includes: Prioritizing the cognitive and emotive needs of clients, an overall reduction in client suffering, and supporting sustainable growth for the clients I serve. Rather than simply helping you to feel better, I want to help you get better!



Deric Hollings, LPC, LCSW



References:


Decision Lab, The. (n.d.). Why are we likely to continue with an investment even if it would be rational to give it up? The sunk cost fallacy, explained. Retrieved from https://thedecisionlab.com/biases/the-sunk-cost-fallacy

Gould, W. R. (2023, April 26). The sunk cost fallacy: How it affects your life decisions. Verywell Mind. Retrieved from https://www.verywellmind.com/what-is-sunk-cost-fallacy-7106851

Hayes, A. (2023, March 28). What is cost-benefit analysis, how is it used, what are its pros and cons? Investopedia. Retrieved from https://www.investopedia.com/terms/c/cost-benefitanalysis.asp

Hollings, D. (2022, May 28). Desire and disturbance. Hollings Therapy, LLC. Retrieved from https://www.hollingstherapy.com/post/desire-and-disturbance

Hollings, D. (2022, March 15). Disclaimer. Hollings Therapy, LLC. Retrieved from https://www.hollingstherapy.com/post/disclaimer

Hollings, D. (n.d.). Hollings Therapy, LLC [Official website]. Hollings Therapy, LLC. Retrieved from https://www.hollingstherapy.com/

Hollings, D. (2022, November 4). Human fallibility. Hollings Therapy, LLC. Retrieved from https://www.hollingstherapy.com/post/human-fallibility

Hollings, D. (2023, May 18). Irrational beliefs. Hollings Therapy, LLC. Retrieved from https://www.hollingstherapy.com/post/irrational-beliefs

Hollings, D. (2022, December 2). Low frustration tolerance. Hollings Therapy, LLC. Retrieved from https://www.hollingstherapy.com/post/low-frustration-tolerance

Hollings, D. (2023, April 24). On truth. Hollings Therapy, LLC. Retrieved from https://www.hollingstherapy.com/post/on-truth

Hollings, D. (2022, November 7). Personal ownership. Hollings Therapy, LLC. Retrieved from https://www.hollingstherapy.com/post/personal-ownership

Hollings, D. (2022, March 25). Rational emotive behavior therapy (REBT). Hollings Therapy, LLC. Retrieved from https://www.hollingstherapy.com/post/rational-emotive-behavior-therapy-rebt

Hollings, D. (2023, March 9). Road rage. Hollings Therapy, LLC. Retrieved from https://www.hollingstherapy.com/post/road-rage

Hollings, D. (2022, November 1). Self-disturbance. Hollings Therapy, LLC. Retrieved from https://www.hollingstherapy.com/post/self-disturbance

Hollings, D. (2022, October 7). Should, must, and ought. Hollings Therapy, LLC. Retrieved from https://www.hollingstherapy.com/post/should-must-and-ought

Hollings, D. (2022, November 9). The ABC model. Hollings Therapy, LLC. Retrieved from https://www.hollingstherapy.com/post/the-abc-model

Hollings, D. (2022, December 23). The A-C connection. Hollings Therapy, LLC. Retrieved from https://www.hollingstherapy.com/post/the-a-c-connection

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Hollings, D. (2022, July 11). Unconditional acceptance. Hollings Therapy, LLC. Retrieved from https://www.hollingstherapy.com/post/unconditional-acceptance

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Linnet, J. (2014, March 25). Neurobiological underpinnings of reward anticipation and outcome evaluation in gambling disorder. Frontiers in Behavioral Science. Retrieved from https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3971161/

Logically Fallacious. (n.d.). Sunk-cost fallacy. Retrieved from https://www.logicallyfallacious.com/cgi-bin/uy/webpages.cgi?/logicalfallacies/Sunk-Cost-Fallacy

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