EconPapers    
Economics at your fingertips  
 

DO SUNK COSTS MATTER?

Randolph McAfee, Hugo Mialon () and Sue Mialon ()

Economic Inquiry, 2010, vol. 48, issue 2, 323-336

Abstract: That sunk costs are not relevant to rational decision making is often presented as one of the basic principles of economics. When people are influenced by sunk costs in their decision making, they are said to be committing the “sunk cost fallacy.” Contrary to conventional wisdom, we argue that in a broad range of situations, it is rational for people to condition behavior on sunk costs because of informational content, reputational concerns, or financial and time constraints. Once all the elements of the decision‐making environment are taken into account, reacting to sunk costs can often be understood as rational behavior. (JEL D0, D01, D8, D81, D83, D9, D90)

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23) Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1111/j.1465-7295.2008.00184.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:ecinqu:v:48:y:2010:i:2:p:323-336

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0095-2583

Access Statistics for this article

Economic Inquiry is currently edited by Preston McAfee

More articles in Economic Inquiry from Western Economic Association International Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2020-05-24
Handle: RePEc:bla:ecinqu:v:48:y:2010:i:2:p:323-336