The sunk-cost effect occurs when irrecoverable past money, time, or effort influences a new choice even though those costs cannot be changed. The original sunk-cost research examined experimental and field settings. In betting, keep settled losses in the audit record but out of the probability for a new event.
Is the cost recoverable?
| Past item | Sunk for the new choice? | Still relevant for |
|---|---|---|
| Settled losing stake | Yes | Cash reconciliation, affordability, and harm review |
| Hours already spent researching | Yes | Process-cost review and whether to stop the project |
| Non-refundable data fee | Yes | Full-period profitability and future subscription choice |
| Open position that can still be closed | Not fully; current alternatives have future payoffs | Current hold, close, or hedge comparison |
| Future subscription renewal | No | Current decision about future cost and benefit |
Sunk does not mean forgotten. The cost remains part of the historical record and may be decisive evidence that gambling is unaffordable or harmful. It means the cost does not become a benefit of taking another risk.
Worked future-only comparison
Assume a settled GBP 30 loss and four hours of completed research. A new, unrelated proposal risks GBP 10 at decimal 2.00. The settled GBP 30 and completed time cannot be recovered by changing the probability of the new event.
Current options are:
- no new bet: future betting cash flow GBP 0;
- new bet wins: future net result GBP 10;
- new bet loses: future net result -GBP 10.
If the estimated win probability is p, expected net value of the new contract is p * GBP 10 + (1 - p) * -GBP 10. Expected value requires current probabilities and payoffs. Adding the GBP 30 to the desired win changes a recovery target, not the event probability.
Reset question
Ask: "If the past cost were zero but every current fact were identical, would I choose the same next action?" A different answer is a signal to inspect sunk-cost influence. It is not proof of a cognitive cause, because affordability, commitments to other people, and future switching costs can legitimately differ.
Decision steps
- Reconcile all settled and open positions.
- Label each past cost as recoverable, partly recoverable, or irrecoverable.
- List only future payoffs for the current alternatives using the expected-value framework.
- Include no action.
- Apply current probability, price, exposure, and wellbeing rules.
- Stop if the objective is to recover the past loss.
Repeated recovery attempts or difficulty stopping are reasons to use practical controls and support. The NHS gambling-harm guide includes warning signs, blocking tools, bank controls, treatment, and support routes.
Next step
Use Chasing Losses for the next part of this topic.
Continue learning
- Next guide: Tilt in Betting
- Related guide: Betting Journal
Assumptions and limitations
The example is hypothetical. Some decisions include genuine future switching costs, contractual obligations, or partially recoverable positions; those must be modelled rather than labelled sunk. The reset question clarifies framing but cannot validate a forecast or make continued gambling safe.
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