What is the term for the phenomenon where decisions are influenced by previous investments, even when it may not be rational?

The term that describes the phenomenon where past investments significantly influence current decision-making, despite the potential irrationality of doing so, is known as the sunk-cost fallacy. This fallacy occurs when individuals continue a behavior or endeavor due to previously invested resources such as time, money, or effort, rather than evaluating the current situation based on its own merits or future potential.

For instance, a person might continue to fund a failing project because they have already spent a large amount of money on it, rather than acknowledging that additional investment may not lead to beneficial outcomes. The essence of this concept revolves around the inability to disregard past costs that cannot be recovered when making decisions, leading people to persist in a course of action that may not be advantageous.

This differs from loss aversion, which relates to the tendency to prefer avoiding losses over acquiring equivalent gains. While loss aversion does influence decision-making, it encompasses a broader perspective on how individuals react to potential losses rather than specifically focusing on past investments. Risk-averse behavior involves a preference for options that minimize losses, while decision fatigue refers to the deteriorating quality of decisions made by an individual after a long session of decision-making. Each of these concepts carries its own implications and contexts within decision theory, but they