Does Learning Economics Make You Less Susceptible to the Sunk Cost Fallacy?

Stefani Milovanska-Farrington (smilovanska@ut.edu) and Dirk Mateer (dmateer@utexas.edu)
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Stefani Milovanska-Farrington: The University of Tampa
Dirk Mateer: University of Texas at Austin

No 17639, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The sunk cost fallacy is typically covered in introductory economics courses. It is among the most important biases that influence decision making. Ronayne et al. (2021a,b) find evidence of behavior consistent with the sunk cost effect and utilize eight questions that measure individuals' susceptibility to the sunk cost fallacy. We extend their research by examining whether a "pop culture" teaching intervention in principles of microeconomics lowers students' predisposition to the fallacy. We find that students become -14.95% less susceptible to the sunk cost fallacy after learning about it. We also observe that students who have taken economics previously exhibit lower susceptibility in all time periods.

Keywords: controlled experiment; empirical test; introductory economics; sunk cost fallacy; teaching economics (search for similar items in EconPapers)
JEL-codes: A20 A22 I21 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2025-01
New Economics Papers: this item is included in nep-cbe and nep-exp
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