Economics at your fingertips  

Sunk-cost fallacy and cognitive ability in individual decision-making

Corina Haita-Falah

Journal of Economic Psychology, 2017, vol. 58, issue C, 44-59

Abstract: This paper reports on a laboratory experiment aiming at documenting the sunk-cost fallacy in individual decision-making and at identifying the role of the cognitive ability in its manifestation. For this purpose, the design rules out loss aversion and cognitive dissonance, identified by the literature as being the main psychological drivers of the bias. The sunk-cost fallacy is identified by comparing a low and a high sunk-cost treatment, respectively, against a control group that does not incur a sunk cost. There is evidence of a weak manifestation of the sunk-cost fallacy, which is statistically significant only for the high sunk-cost treatment. However, strong evidence of the fallacy was found among the high-cognitive-ability subjects. Finally, although cognitive ability is predictive of status-quo bias, it was not found to reduce the sunk-cost bias.

Keywords: C91; D03; D11; M41; Cognitive ability; Cognitive dissonance; Sunk-cost fallacy; Loss aversion (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

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:

Access Statistics for this article

Journal of Economic Psychology is currently edited by G. Antonides and D. Read

More articles in Journal of Economic Psychology from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2018-03-28
Handle: RePEc:eee:joepsy:v:58:y:2017:i:c:p:44-59