Evaluating the Sunk Cost Effect

Arbeitspapier

We provide experimental evidence of behavior consistent with the sunk cost effect. Subjects who earned a lottery via a real-effort task were given an opportunity to switch to a dominant lottery; 23% chose to stick with their dominated lottery. The endowment effect accounts for roughly only one third of the effect. Subjects' capacity for cognitive reflection is a significant determinant of sunk cost behavior. We also find stocks of knowledge or experience (crystallized intelligence) predict sunk cost behavior, rather than algorithmic thinking (fluid intelligence) or the personality trait of openness. We construct and validate a scale, the "SCE-8", which encompasses many resources individuals can spend, and offers researchers an efficient way to measure susceptibility to the sunk cost effect.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 14257

Classification and Topics

• Classification: Wirtschaft ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Survey Methods; Sampling Methods ; Design of Experiments: General
• Subject: sunk cost effect ; sunk cost fallacy ; endowment effect ; cognitive ability ; fluid intelligence ; crystallized intelligence ; reflective thinking ; randomized controlled trial ; online experiment ; online survey ; psychological scales ; scale validation ; Raven’s progressive matrices ; international cognitive ability resource ; cognitive reflection test ; openness

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ronayne, David ; Sgroi, Daniel ; Tuckwell, Anthony
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/236288
• Last update: 10.03.2025, 11:44 AM CET