No Time to Waste: Restricting Life‐Span Temporal Horizons Decreases the Sunk‐Cost Fallacy

In three studies, we examined the influence of restricted and expansive temporal horizons on the sunk‐cost fallacy. The sunk‐cost fallacy occurs when prior investments instead of future returns influence decisions about future investments. When making decisions about future investments, rational decision makers base decisions on future consequences, not already‐invested costs that are “sunk” and cannot be recovered. In Study 1, we restricted young adult college students' temporal horizons by instructing them to imagine that they did not have much longer to live; this manipulation decreased the sunk‐cost fallacy. In Study 2, we replicated Study 1 and also found that the consequences of manipulating temporal horizons were most pronounced for prior investments of time and that prior investments of time and money had different implications for the sunk‐cost fallacy, depending on the social or nonsocial decision domain. In Study 3, we manipulated temporal horizons by instructing students to imagine their time as a college student was coming to an end. Results were mostly similar to Study 2 but also suggested that focusing on one's mortality may have unique consequences. Implications of the three studies for understanding age differences in sunk‐cost decisions, interventions to improve sunk‐cost decisions, and the situations in which interventions might be most needed are discussed. Copyright © 2013 John Wiley & Sons, Ltd.     

沉没成本效应的产生根源与影响因素

沉没成本效应是指决策者的决策行为因受沉没成本影响而产生的一种非理性决策现象。针对这一决策偏差的产生根源,研究者从认知、动机和神经三个角度提出了解释。沉没成本效应的影响因素包括沉没成本特性、情境因素、个体差异和文化差异等。基于先前研究存在的问题和不足,沉没成本效应的未来研究应着眼于改进研究方法,探究产生根源,关注行为沉没成本和加强应用研究。     

Age differences in financial decision making: The benefits of more experience and less negative emotions

The emerging literature on aging and decision making posits that decision‐making competence changes with age, as a result of age differences in various cognitive and noncognitive individual‐differences characteristics. In a national life‐span sample from the United Kingdom (N = 926), we examined age differences in financial decisions, including performance measures of sunk cost and credit card repayment decisions, and self‐report measures of money management and financial decision outcomes. Participants also completed four individual‐differences characteristics that have been proposed as relevant to financial decision making, including two cognitive ones (numeracy and experience‐based knowledge) and two noncognitive ones (negative emotions about financial decisions). First, we examined how age was related to the four financial decision‐making measures and the four individual‐differences characteristics. Older age was correlated to better scores on each of the four financial decision‐making measures, more experience‐based knowledge, less negative emotions about financial decisions, whereas numeracy and motivation were not significantly correlated with age. Second, we found that considering both the two cognitive and the two noncognitive individual‐differences characteristics increased predictions of financial decision making, as compared with considering either alone. Third, we examined how these four individual‐differences characteristics contributed to age differences in financial decision making. Older adults' higher levels of experience‐based knowledge and lower levels of negative emotions seemed to especially benefit their financial decision making. We discuss implications for theories on aging and decision making, as well as for interventions targeting financial decisions.     

Escalation of commitment with transparent future outcomes

A frequent case of irrational decision making is the tendency to escalate commitment to a chosen course of action after unsuccessful prior investments of money, effort, or time (sunk costs). In previous research it is argued that escalation does not occur when future outcomes and alternative investments are transparent. Inconsistent with this argument, in an experiment in which undergraduates were presented fictitious investment problems with sunk costs, escalation was demonstrated when full information was given about investment alternatives and estimates of future returns. Thus, it is indicated that people may escalate despite knowing that it will not make them economically better off. A more comprehensive understanding of escalation requires disentangling people's noneconomic reasons for escalation.     

Looking forward and looking back: integrating completion and sunk-cost effects within an escalation-of-commitment progress decision

Currently, there are 2 conflicting frameworks with which to understand why decision makers might escalate their commitment to a previously chosen course of action: sunk costs and project completion. The author proposes that sunk costs and need to complete exert simultaneous pressures, both independent and interactive, on a decision maker's level of commitment. The responses of 340 participants were analyzed and supported a complementary relationship between the 2 predictors. In addition, sunk costs demonstrated a curvilinear influence on commitment and an interaction with level of completion that supported a Level of Completion x Sunk Cost moderation model. (A marginal utility model was not supported.) Results are discussed in terms of their relevance toward offering a complementary view of 2 potential antecedents to a decision maker's propensity to escalate his or her commitment to a previously chosen course of action.     

The mental accounting of sunk time costs: why time is not like money

The sunk‐cost effect, an irrational attention to non‐recoverable past costs while making current decisions, has been documented widely in the domain of monetary costs. In this paper, I study the effect of past time investments on current decisions. In three experiments using choice situations, I demonstrate that the sunk‐cost effect is not observed for past investments of time, but the effect reappears when the investments are expressed as monetary quantities. I further propose that this ‘pseudo‐rationality’ is due to the fact that individuals lack the ability to account for time in the same way as they account for money. In two additional experiments, I facilitate the accounting of time and show that the irrational sunk‐cost effect reappears. In a final experiment, I test my propositions in a setting where subjects make real investments of time and subsequently make real choices. Copyright © 2001 John Wiley & Sons, Ltd.     

Seeing into the Future: Future Time Orientation as a Moderator of Temporal Distance Effects on Educators' Decisions

Research suggests that the temporal distance from decision outcomes leads to divergent decisions for the near and the distal future. As such, high‐level idealistic concerns and values dominate decisions for the distant future, whereas low‐level pragmatic concerns play a greater role in decisions for the near future. We examined how individual differences in future time orientation are related to decisions vis‐à‐vis the near versus the distal future. The results of three studies, with participants with varying levels of expertise—students (Studies 2 and 3), teachers (Study 1), and school principals (Study 2)—show that principals tend to be overall more idealistic in their choices. Yet discrepancies between decisions for the near versus the distal future exist among all three levels of expertise. However, this dominance of idealistic over pragmatic concerns for more distant future decisions effect was smaller the higher the future time orientation was (whether measured or manipulated). Implications for educational and managerial decision making and training are discussed. Copyright © 2017 John Wiley & Sons, Ltd.     

Sunk Cost Effects: The Influences of Instruction and Future Return Estimates

Normative principles imply that decision makers′ choices should be affected solely by the prospective future consequences of the options. Previous work, however, has demonstrated the occurrence of sunk cost effects, whereby decision makers are reluctant to abandon options in which they have made prior investments. The present research shows that, contrary to earlier findings, there exist conditions under which sunk cost effects are reduced significantly by instruction in pertinent economic principles. Additional findings indicate that sunk cost effects are mitigated by an important factor that is often present in real-world decision situations but omitted in most sunk cost research paradigms-explicit estimates of the future returns the given options might yield. Theoretical and practical implications are developed and discussed, including possibly common ambiguities about what normative sunk costs principles imply and how they should be applied.     

Sunk cost of local elected representatives in situation of fiscal competition: An example of escalating commitment

Introduction

Competition between French local communities to build infrastructures to attract enterprises and residents could sometimes result in irrational public spending.

Behavioral Causality Orientations and Investment Decisions Following Negative Feedback

Individual differences in the locus of causality for behavior are seldom considered in tests of regulatory events (e. g., feedback and coercion). This study examined the relationship between Deci and Ryan's (1985a) causality orientation constructs and decision makers' behavioral intention responses to negative feedback following an initial decision. A laboratory experiment involved 98 Singaporean business students in a commitment escalation context in which sunk costs for an initial investment failure could be recovered by reinvesting in that prospect in preference to selecting an alternative that had previously performed better. Consistent with various theories of the escalation effect, in which subjects responsible for prior negative outcomes tend to reinvest in the initially chosen project, control orientation was positively associated with reinvestment and impersonal orientation was negatively related to reinvestment. The influence of personality on reinvestment/withdrawal behavior was moderated by the experimental condition of responsibility for the initial sunk cost. We discuss the implications of these findings for the construct validity of the causality orientations, the role of personality in commitment escalation, and the important role that individual differences in perceptions of regulatory events may play in determining behavior.     

Sensation Seeking and Need for Achievement Among Study-Abroad Students

Abstract

A constitutional decision rule is the criterion of agreement that the collectivity designates as necessary to achieve binding decisions. Ostrom and Ostrom's (1977) individual calculus model specifies that groups consider two types of costs in choosing a constitutional decision rule: decision-making costs (time, money and effort invested in the decision-making process) and deprivation costs (the extent to which each participant is disadvantaged by an unfavorable decision). Deprivation costs and decision-making costs were manipulated, and preferences for decision rules were observed in this study of 420 American college students. The results partially supported the Ostrom and Ostrom model: Decision-making costs were related to constitutional choice; deprivation costs were not so related. A very large preference was found for majority rule and elected leader rule. In general, subjects did not respond strongly to the desires for efficiency or for individual gain that were proposed by the calculus model.     

认知闭合需要与预期后悔对个体职业决策过程的影响

本研究旨在探讨认知闭合需要(NFCC)与预期后悔(AR)对个体职业决策过程的影响。基于两种预期后悔启动方式,采用2(高NFCC,低NFCC)×2(不启动AR,启动AR)的两因素被试间设计完成了两个单独实验。结果表明:(1)不同NFCC个体的职业决策过程存在显著差异,NFCC高的个体付出的认知努力更少;(2)预期后悔显著影响个体的职业决策过程,启动预期后悔条件下个体表现出更为谨慎的决策过程;(3)预期后悔能有效缓冲高NFCC个体的认知闭合过程。     

The Mediating Role of Sales Behaviors: An Alternative Perspective of Sales Performance and Effectiveness

Business decisions about hiring, promoting, an purchasing should be made in an unbiassed way When sex stereotyping influences the decisio process. Such decisions are not only unfair bi can lead to large economic and social costs. A experiment involving more than 200 MBAs measured the impact of general attitudes toward women in business and various personal characteristics on the extent to which there was se stereotyping with regard to men and women in sales positions. Results suggest that sex stereotyping still exists, but its extent depends on the attitude being measured and on characteristics of the stereotyping the solution is to provide exposure to competent females in selling and sales manage ment positions.     

The Lingering Effects of Our Past Experiences: The Sunk‐Cost Fallacy and the Inaction‐Inertia Effect

The effect of past experiences and actions in shaping current perceptions, emotions, decisions and goals is widely recognized in the psychological literature. When it comes to economic decisions, however, these influences are sometimes seen as impediments to rational decision‐making. In an attempt to explore the enduring consequences of the past, we present, compare, and discuss two familiar behavioral phenomena: The sunk‐cost effect, which refers to situations where continued actions are fueled by past investments, and the inaction‐inertia effect, in which continued inaction is triggered by the shadows of missed opportunities. Although one process elicits continued action and the other continued inaction, we show that there is a great deal of similarity in the psychological underpinnings of these effects, and argue that respecting sunk costs and avoiding actions that are associated with forgone opportunities are not necessarily unreasonable, or maladaptive behaviors.     

Impact of decision goal on escalation

This research investigates the sunk-cost effect or escalation defined as the irrational tendency to choose to continue to invest money, time, or effort following unsuccessful investments. Building on previous research demonstrating a loss-sensitivity principle in sequential decision making, the hypothesis was proposed that a loss-minimization goal would lead to stronger effects of sunk outcomes (prior gains and losses) than would a gain-maximizing goal. The hypothesis was investigated in three experiments with undergraduates responding to investment decision scenarios. Although the tendency to continue investments was always larger for gain-maximizing than for loss-minimizing goal instructions, the sunk-outcome effect was stronger in the former case. However, when the decisions were personal and concerned lower stakes rather than business investments involving large amounts of money, the expected stronger effect of sunk outcomes was found for loss-minimizing goal instructions. Another finding was that the expected value was never ignored, thus suggesting that future research should focus on the joint effects of the expected value and sunk outcomes.     

Weighing the past and the future in decision making

Prior irreversible investments of money, time, or effort referred to as sunk costs frequently lead to decisions to continue a chosen course of action despite that this is irrational. With the aim of demonstrating that such escalation of commitment is a special case of a more general phenomenon, two experiments were carried out employing undergraduates as participants. Experiment 1 showed for fictitious personal and business investment scenarios that both prior losses and gains (sunk outcomes) affected choices to continue or discontinue the investment. In Experiment 2 the effect of sunk outcomes was reduced although not eliminated by a monetary bonus that in one condition depended on the future outcomes of the second gamble in two-stage gambles, in another condition on the future returns in personal investment scenarios. In support of a more inclusive theory subsuming escalation of commitment, the decisions were affected by both past and future outcomes and both gains and losses.     

Variations of career decision ambiguity tolerance between China and the United States and between high school and college

The variation of career decision ambiguity tolerance (CDAT) by cultures and development stages was examined in a sample of Chinese high school students (n = 339), a sample of Chinese college students (n = 356), along with U.S. college students (n = 328). It was hypothesized that career decision ambiguity tolerance decreases when individuals experience more societal/cultural pressure on decidedness and responsibility for their career decision making. Based on the three-factor structure of CDAT (i.e., preference, tolerance, and aversion), measurement invariance was examined between Chinese and U.S. college students and between Chinese high school and college students. While the factor of tolerance was not upheld in both Chinese samples, the factors of preference and aversion were found to be structurally invariant across cultures and developmental stages. The analyses comparing means of preference and aversion found that U.S. college students had a higher level of preference relative to Chinese college students. It was also found that in comparison to Chinese high school students, Chinese college students had a higher level of aversion. The criterion validity of CDAT in Chinese culture was supported in the findings of preference and aversion being associated with career exploration and career indecision. The implication of this study was discussed along with its limitations and suggestions for future research.     

Individual differences in need for cognition and decision-making competence among leaders

When making decisions, people sometimes deviate from normative standards. While such deviations may appear to be alarmingly common, examining individual differences may reveal a more nuanced picture. Specifically, the personality factor of need for cognition (i.e., the extent to which people engage in and enjoy effortful cognitive activities; Cacioppo & Petty, 1982) may moderate decision makers’ susceptibility to bias, as could personality factors associated with being a leader. As part of a large-scale assessment of high-level leaders, participants completed a battery of decision-making competence and personality scales. Leaders who scored higher on need for cognition performed better on two of four components of a decision-making competence measure: framing and honoring sunk costs. In addition, the leader sample performed better than published controls. Thus, both individual differences in need for cognition and leadership experience moderate susceptibility to decision biases. Implications for broader theories of individual differences and bias are discussed.