The “sunk cost” phenomenon refers to the tendency of humans to value things more when they have invested significant resources into them. This could include time, money, effort, or even suffering. Even though it may not make logical sense, people often make decisions based on what they have already invested, rather than considering the objective advantages or disadvantages.
Researchers at Stanford Medicine conducted a study to understand the neural basis for this phenomenon. They found that dopamine, a brain chemical associated with pleasure, learning, and habit formation, plays a crucial role in this phenomenon. Dopamine is released in a region of the brain called the striatum when we have to put in effort or endure discomfort to obtain a reward. This suggests that the brain values rewards more when they come at a higher cost.
To investigate this further, the researchers conducted experiments on mice. They measured the amount of consumption when a reward was cost-free versus when there was a cost attached to acquiring it. The results showed that dopamine release in the striatum was significantly influenced by the effort required to obtain the reward.
When we invest a lot of time, money, or effort into something, our brain releases a chemical called dopamine that makes us value that thing more, even if it doesn’t make logical sense. This could be because our brain wants to motivate us to keep trying and investing in things, especially when resources are limited.
Lead researcher Dr. Neir Eshel explains that in environments with limited resources, where rewards are only obtained after significant effort, high dopamine secretion may be necessary to motivate individuals to repeat the process. This reinforces previous behaviors and justifies future investments.
While economists may view the valuation of items based on sunk costs as irrational decision-making, this study offers insights into the evolutionary significance of this phenomenon. In environments where resources are scarce, it may be essential for individuals to be motivated to expend significant effort for future rewards.