One of the hardest things about settling a lawsuit is for the parties to let go. They have spent all this time and energy (mental and emotional) as well as money on it over a period of months (if not years) and now, in the face of an offer to settle that is less than they had hoped for, they are faced with the choice of settling or moving forward towards a trial that they may not win. In other words, they might be “throwing good money after bad”.

Many of us feel that we should keep moving forward precisely because of all the time and energy invested. If we settle for less than we originally wanted, we will “lose” our investment. We do not realize, that no matter what we do in the future, we will never recover the past investment so that the past should not govern our decision whether to settle.

This “logic” is known as the “sunk cost fallacy” which is a tendency to continue to spend more time, energy and/or money on something because of all of the time, energy and/or money we have already poured into it, even though the returns are diminishing.(see: ). We are unwilling to admit that we should walk away but instead we escalate our commitment to the endeavor!

It turns out that we humans are not the only ones who do this. A recent article in the New York Times by Erica Goode entitled  “Mice Don’t Know When To Let Go, Either” (online-July 12, 2018) discusses a study of mice and rats in which these non-humans engaged in similar behavior.  Notably, the researchers found that the rats and mice did NOT consider the time they were using to decide whether to invest their time in seeking the reward. That is, even though time is time, no matter how it is spent, these non-humans did not include the time used in deciding what to do in their “sunk cost” calculations. (Id.) It was only AFTER they decided to wait for the treat that this fallacy began to operate: the longer they waited for the treat, the more likely they would “stick out the delay to the end, even though it cut into their overall time to seek food.” (Id.) (The rats and mice were given a limited amount of time to seek out food!)

The researchers conducted a similarly timed experiment with humans and found the same thing; humans did not put into their equation the amount of time they spent deciding what to do. They only began doing so, once they decided on a course of action and like the mice, once they decided to wait for the “treat”, they would wait and wait and wait, staying until the end, even though that wait time cut into the overall time they had to complete the experiment. (Id.)

So- the morale- if there is one- is when considering whether to accept or reject a resolution to the dispute, consider that the time you spend deliberating is also part of your “sunk costs”! And more importantly, realize that you may well be “throwing good money after bad” with all its diminishing returns!

… Just something to think about.


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