The sunk cost fallacy is a cognitive bias where individuals continue investing in a project, relationship, or decision based on the cumulative prior investment of time, money, or resources, rather than on the current expected outcomes. This fallacy leads people to make irrational decisions as they feel more committed to the endeavor due to their past investments, even when the situation no longer merits such commitment.
A classic example is when a person continues to repair an old car that has already cost them a significant amount in repairs, even though the value of the car has decreased dramatically and it would be cheaper to buy a new one.
To overcome the sunk cost fallacy, one should focus on prospective costs and benefits rather than past expenditures. Making decisions based on future outcomes and what offers the best return on investment, regardless of past commitments, can help mitigate this bias.