It seems to scale to willpower: For some people, "a single small failure once per month" is going to be an impossible goal, but "multiple small failures OR one big failure" is an option. If and only if one is dealing with THAT choice, it seems like a single big failure does a lot less damage to motivation.
If you've got different anecdotes then I think we'll just have to agree to disagree. If you've got studies saying I'm wrong, I'm happy to accept that I'm wrong - I know it worked, since I used this to help fix my spouse's sleep cycle, but that doesn't mean it worked for the reasons I think. :)
I agree, you can get over some slip-ups, depending on how easy what you're trying is compared to your motivation.
As you said, it's a chain - the more you succeed, the easier it gets. Every failure, on the other hand, makes it harder. Depending on the difficulty of what you're trying, a hard reset is sensible because it saves time from an already doomed attempt, >and< makes the next one easier (due to the deterrent thing).
The "what-the-hell" effect, when you break a rule and then go on a rule-breaking rampage, like binge eating after a single dietary transgression, is a very common failure mode. It was recently mentioned in the Overcoming Bias blog comments on the Which biases matter most? Let’s prioritise the worst! post. I have not been able to find an explicit discussion of this issue here, though there are quite a few comments on binge-<something>.
From the Psyblog entry quoting this paper:
Although everyone was given the same slice of pizza; when it was served up, for some participants it was made to look larger by comparison.
This made some people think they'd eaten more than they really had; although in reality they'd all eaten exactly the same amount. It's a clever manipulation and it means we can just see the effect of thinking you've eaten too much rather than actually having eaten too much.
When the cookies were weighed it turned out that those who were on a diet and thought they'd blown their limit ate more of the cookies than those who weren't on a diet. In fact over 50% more! [Emphasis mine]
Other examples include sliding back into one's old drinking/smoking/surfing habit. For example, that's how I stopped using Pomodoro.
My (title) question is, what's the mechanism of this cognitive failure and whether it can be reduced to a combination of existing biases/fallacies? If the latter is true, can addressing one of the components counteract the what-the-hell effect? If so, how would one go about testing it?
For completeness, the top hit from Google scholar to the "what-the-hell effect" query is chapter 5 of Striving and Feeling: Interactions Among Goals, Affect, and Self-regulation, by Martin and Tesser.
EDIT: personal anecdotes are encouraged, they may help construct a more complete picture.