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Investment loss effect (Sunk Cost Effect)
Definition
The Sunk Cost Effect refers to the tendency for users to avoid further investment, given the time, effort, and resources they have already invested. This can lead to a desire to recover what has already been lost.
Explanation
The Sunk Cost Effect is described as follows:
Investment avoidance: When users have already invested time, effort, and resources into something, they tend to want to recover that investment. Therefore, even if a better alternative appears, they may feel bad about their investment and continue with their current choice.
Irrational decisions: The Sunk Cost Effect can often lead to irrational decisions. For example, if a user is not satisfied with a service they are subscribed to, but thinks they have already paid a lot of money, they will tend to continue using that service.
Design Strategy: When designing a product or service, you can consider strategies that help users avoid making irrational decisions by considering the Sunk Cost Effect. For example, you can present users with better alternatives or provide them with options to make better choices instead of sticking with their current choice.
Importance
This principle explains the irrational decisions of users and is one of the important factors to consider in the design of products or services. If users avoid better choices considering what they have already invested, it is necessary to devise a design strategy to minimize the resulting losses.
