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Sunk Costs Effect: Does Theoretical Knowledge Affects Students’ Decision Process?

  • Suliani Rover

    (University of São Paulo)

  • Artur Filipe Ewald Wuerges

    (Federal University of Santa Catarina)

  • Eduardo Cardeal Tomazzia

    (Federal University of Santa Catarina)

  • José Alonso Borba

    (Federal University of Santa Catarina)

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    The sunk cost is defined as a greater disposition to continue an endeavor, once an investment in money, effort or time has been made. According to economic theory, however, these past expenses should not be taken into consideration, as they cannot be recovered. The objective of this study is to investigate if the student from undergraduate courses in the area of business is less susceptible to the sunk costs effect than students from other areas. Five hundred and twenty eight questionnaires were applied on students of nine undergraduate courses of three universities of Santa Catarina. The results confirm the relevance of the cognitive bias caused by sunk costs, as they indicate a lower probability of choosing the right answer when these involve sunk costs in the decisions. The assumption that the students from the business area are less affected by this bias was not confirmed.

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    Article provided by Fucape Business School in its journal Brazilian Business Review.

    Volume (Year): 6 (2009)
    Issue (Month): 3 (September)
    Pages: 232-248

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    Handle: RePEc:bbz:fcpbbr:v:6:y:2009:i:3:p:232-248
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