Which concept describes decisions to continue a project due to prior investments, even when it is likely to fail?

Which concept describes decisions to continue a project due to prior investments, even when it is likely to fail?

• A. Confirmation Bias
• B. Sunk Cost Fallacy
• C. Cognitive Dissonance
• D. Gambler's Fallacy

Answer: (B)

The main idea here is that decisions can be swayed by money or resources already spent, even when continuing the project isn’t a good choice. This is the sunk cost fallacy: sunk costs are costs that cannot be recovered, so rational decision-making would ignore them and focus on future costs and benefits. When people keep funding a failing project simply because of what has already been invested, they’re trying to justify past decisions instead of evaluating the situation on its own merits. This tendency can lead to escalating commitment, where more resources are poured in despite poor prospects. This differs from confirmation bias, which involves seeking information that confirms what you already believe; cognitive dissonance, which is the discomfort from holding contradictory beliefs or actions; and the gambler’s fallacy, which is the mistaken belief that past random results will influence future random outcomes.

The main idea here is that decisions can be swayed by money or resources already spent, even when continuing the project isn’t a good choice. This is the sunk cost fallacy: sunk costs are costs that cannot be recovered, so rational decision-making would ignore them and focus on future costs and benefits. When people keep funding a failing project simply because of what has already been invested, they’re trying to justify past decisions instead of evaluating the situation on its own merits. This tendency can lead to escalating commitment, where more resources are poured in despite poor prospects.

This differs from confirmation bias, which involves seeking information that confirms what you already believe; cognitive dissonance, which is the discomfort from holding contradictory beliefs or actions; and the gambler’s fallacy, which is the mistaken belief that past random results will influence future random outcomes.