Evaluating the sunk cost effect

David Ronayne, Daniel Sgroi and Anthony Tuckwell

Journal of Economic Behavior & Organization, 2021, vol. 186, issue C, 318-327

Abstract: 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.

Keywords: Sunk cost effect; Sunk cost fallacy; Endowment effect; Cognitive ability; Psychological scales; Scale validation (search for similar items in EconPapers)
JEL-codes: C83 C90 D91 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Working Paper: Evaluating the Sunk Cost Effect (2021)
Working Paper: Evaluating the Sunk Cost Effect (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:186:y:2021:i:c:p:318-327

DOI: 10.1016/j.jebo.2021.03.029

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