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Persistent Sunk Cost Fallacy in a Real Effort Experiment

Author

Listed:
  • Priyodorshi Banerjee
  • S. Chandrasekhar
  • P. Srikant

Abstract

Subjects chose whether to leave with an endowment or stay to perform some simple tasks in a real effort experiment. In addition to performance pay, staying subjects received their endowment in the control condition, but had to sacrifice it in the treatment condition. We found average performance of staying subjects, after controlling for selection effects, was higher in the treatment condition. Further, the sunk cost effect persisted well after the decision as to whether to stay or leave had been made. JEL Classification: D24, D83, J24

Suggested Citation

  • Priyodorshi Banerjee & S. Chandrasekhar & P. Srikant, 2019. "Persistent Sunk Cost Fallacy in a Real Effort Experiment," Studies in Microeconomics, , vol. 7(1), pages 161-172, June.
    • Handle: RePEc:sae:miceco:v:7:y:2019:i:1:p:161-172
    DOI: 10.1177/2321022219851593
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    References listed on IDEAS

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    More about this item

    Keywords

    Sunk cost; real effort experiment; selection effect; persistence;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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