Introduction to Behavioral Economics

Money you have already spent and cannot get back is called a sunk cost. The sunk cost fallacy is letting that already-spent money push you into spending even more — as if continuing could somehow get the old money back. It can't. The money is gone either way.

Here is the version you have lived. You pay for a subscription — a streaming service, a game pass, an app. A few months later you barely open it. But cancelling feels like "wasting" what you have already paid, so you keep it. Notice the trap: the money you already paid is gone whether you cancel or not. The only real question is whether the *next* month is worth it. The past payment has nothing to do with that.

The right way to think is to ignore what is behind you and look only at what is ahead. From today forward, what will this cost me, and what will I get? If you wouldn't sign up for it fresh at today's price, you shouldn't keep paying for it just because you signed up before.

Now here's where it gets harder in practice — because the whole subscription business model is built to make cancelling feel like a loss, even when keeping it is the real loss.