Evaluating the Sunk Cost Eﬀect
David Ronayne (),
Daniel Sgroi and
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Anthony Tuckwell: Universityof Warwick, ESRC CAGE Centre and the Alan Turing Institute
The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics
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; yet 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; ﬂuid intelligence; crystallized intelligence; reﬂective thinking; online experiment; online survey; psychological scales; scale validation; Raven’s progressive matrices; international cognitive ability resource; cognitive reﬂection test; openness. JEL codes: D91; C83; C90 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-neu
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