Searching for the sunk cost fallacy
We seek to isolate in the laboratory factors that encourage and discourage the sunk cost fallacy. Subjects play a computer game in which they decide whether to keep digging for treasure on an island or to sink a cost (which will turn out to be either high or low) to move to another island. The research hypothesis is that subjects will stay longer on islands that were more costly to find. Eleven treatment variables are considered, e.g. alternative visual displays, whether the treasure value of an island is shown on arrival or discovered by trial and error, and alternative parameters for sunk costs. The data reveal a surprisingly small sunk cost effect that is generally insensitive to the proposed psychological drivers. Copyright Economic Science Association 2007
Volume (Year): 10 (2007)
Issue (Month): 1 (March)
|Contact details of provider:|| Web page: http://www.springer.com|
More information through EDIRC
|Order Information:||Web: http://www.springer.com/economics/economic+theory/journal/10683/PS2|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Camerer, Colin F. & Weber, Roberto A., 1999.
"The econometrics and behavioral economics of escalation of commitment: a re-examination of Staw and Hoang's NBA data,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 39(1), pages 59-82, May.
- Camerer, Colin F. & Weber, Roberto A., 1998. "The Econometrics and Behavioral Economics of Escalation of Commitment: A Re-examination of Staw and Hoang's NBA Data," Working Papers 1043, California Institute of Technology, Division of the Humanities and Social Sciences.
- Sonnemans, Joep, 1998. "Strategies of search," Journal of Economic Behavior & Organization, Elsevier, vol. 35(3), pages 309-332, April.
- Heath, Chip, 1995. "Escalation and De-escalation of Commitment in Response to Sunk Costs: The Role of Budgeting in Mental Accounting," Organizational Behavior and Human Decision Processes, Elsevier, vol. 62(1), pages 38-54, April.
- Friedman,Daniel & Sunder,Shyam, 1994. "Experimental Methods," Cambridge Books, Cambridge University Press, number 9780521456821, November.
- Theo Offerman & Jan Potters, 2006. "Does Auctioning of Entry Licences Induce Collusion? An Experimental Study," Review of Economic Studies, Oxford University Press, vol. 73(3), pages 769-791.
- Offerman, T.J.S. & Potters, J.J.M., 2006. "Does auctioning of entry licences induce collusions? An experimental study," Other publications TiSEM d72095fa-6c74-49a2-8c82-2, Tilburg University, School of Economics and Management.
- Cox, James C & Oaxaca, Ronald L, 1992. "Direct Tests of the Reservation Wage Property," Economic Journal, Royal Economic Society, vol. 102(415), pages 1423-1432, November.
- Kogut, Carl A., 1990. "Consumer search behavior and sunk costs," Journal of Economic Behavior & Organization, Elsevier, vol. 14(3), pages 381-392, December.
- Lorne Carmichael & W. Bentley MacLeod, 2003. "Caring About Sunk Costs: A Behavioral Solution to Holdup Problems with Small Stakes," Journal of Law, Economics and Organization, Oxford University Press, vol. 19(1), pages 106-118, April.
- Northcraft, Gregory B. & Neale, Margaret A., 1986. "Opportunity costs and the framing of resource allocation decisions," Organizational Behavior and Human Decision Processes, Elsevier, vol. 37(3), pages 348-356, June.
- Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March.
- Matthew Rabin., 1997. "Psychology and Economics," Economics Working Papers 97-251, University of California at Berkeley.
- Rabin, Matthew, 1997. "Psychology and Economics," Department of Economics, Working Paper Series qt8jd5z5j2, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Hey, John D., 1987. "Still searching," Journal of Economic Behavior & Organization, Elsevier, vol. 8(1), pages 137-144, March.
- Garland, Howard & Newport, Stephanie, 1991. "Effects of absolute and relative sunk costs on the decision to persist with a course of action," Organizational Behavior and Human Decision Processes, Elsevier, vol. 48(1), pages 55-69, February.
- Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
- Hey, John D., 1982. "Search for rules for search," Journal of Economic Behavior & Organization, Elsevier, vol. 3(1), pages 65-81, March.
- Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
- Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
- Parayre, Roch, 1995. "The strategic implications of sunk costs: A behavioral perspective," Journal of Economic Behavior & Organization, Elsevier, vol. 28(3), pages 417-442, December.
- Sonnemans, Joep, 2000. "Decisions and strategies in a sequential search experiment," Journal of Economic Psychology, Elsevier, vol. 21(1), pages 91-102, February.
- Joep Sonnemans, 1998. "Decision and Strategies in a Sequential Search Experiment," Tinbergen Institute Discussion Papers 98-032/1, Tinbergen Institute.
- Cox, James C & Oaxaca, Ronald L, 1989. "Laboratory Experiments with a Finite-Horizon Job-Search Model," Journal of Risk and Uncertainty, Springer, vol. 2(3), pages 301-329, September.
- Tan, Hun-Tong & Yates, J. Frank, 1995. "Sunk Cost Effects: The Influences of Instruction and Future Return Estimates," Organizational Behavior and Human Decision Processes, Elsevier, vol. 63(3), pages 311-319, September.
- Schotter, Andrew & Braunstein, Yale M, 1981. "Economic Search: An Experimental Study," Economic Inquiry, Western Economic Association International, vol. 19(1), pages 1-25, January.
- repec:bla:joares:v:27:y:1989:i:1:p:59-77 is not listed on IDEAS
- Harrison, Glenn W & Morgan, Peter, 1990. "Search Intensity in Experiments," Economic Journal, Royal Economic Society, vol. 100(401), pages 478-486, June.
- Meyer, Donald J., 1993. "First price auctions with entry: An experimental investigation," The Quarterly Review of Economics and Finance, Elsevier, vol. 33(2), pages 107-122.
- Arkes, Hal R. & Blumer, Catherine, 1985. "The psychology of sunk cost," Organizational Behavior and Human Decision Processes, Elsevier, vol. 35(1), pages 124-140, February.
- Whyte, Glen, 1993. "Escalating Commitment in Individual and Group Decision Making: A Prospect Theory Approach," Organizational Behavior and Human Decision Processes, Elsevier, vol. 54(3), pages 430-455, April. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:kap:expeco:v:10:y:2007:i:1:p:79-104. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.