The sunk cost effect across species: A review of persistence in a course of action due to prior investment

The sunk cost effect is the bias or tendency to persist in a course of action due to prior investments of effort, money or time. At the time of the only review on the sunk cost effect across species (Arkes & Ayton, 1999), research with nonhuman animals had been ecological in its nature, and the findings about the effect of past investments on current choice were inconclusive. However, in the last decade a new line of experimental laboratory‐based research has emerged with the promise of revolutionizing the way we approach the study of the sunk cost effect in nonhumans. In the present review we challenge Arkes and Ayton's conclusion that the sunk cost effect is exclusive to humans, and describe evidence for the sunk cost effect in nonhuman animals. By doing so, we also challenge the current explanations for the sunk cost effect in humans, as they are not applicable to nonhumans. We argue that a unified theory is called for, because different independent variables, in particular, investment amount, have the same influence on the sunk cost effect across species. Finally, we suggest possible psychological mechanisms shared across different species, contrast and depreciation, that could explain the sunk cost effect.     

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.     

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。     

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.     

Inaction inertia, the sunk cost effect, and handedness: Avoiding the losses of past decisions

Strength of handedness, or the degree to which an individual prefers to use a single hand to perform various tasks, is a neurological marker for brain organization and has been shown to be linked to episodic memory, attribute framing, and anchoring, as well as other domains and tasks. The present work explores the relationship of handedness to both inaction inertia (the inclination to resist an action after previously bypassing a similar action) as well as to the sunk cost effect (the tendency to continue to engage in a behavior after an initial investment of time or money has been made). In Experiment 1, mixed-handers displayed a larger inaction inertia effect than strong-handers. In Experiment 2, they displayed a larger sunk cost effect than strong-handers. Experiments 3 and 4 extended the sunk cost finding into a different domain and explored how mixed- and strong-handers react to additional information designed to increase the comparative advantage of terminating, rather than continuing, a failed project. Overall, we found that mixed-handers were more likely to show inertia effects because of an increased aversion to losses. The results of Experiment 4 suggest that, when provided with additional information that made it clear that continuing a project would be a greater loss than terminating it, mixed-handers no longer showed a larger sunk cost effect than strong-handers, highlighting the importance of carefully considering exactly how sunk cost scenarios are worded and providing additional information on how mixed- and strong-handers differ in belief updating.     

Sunk Cost and Commitment to Medical Treatment

The influence of prior, irretrievable, investment (sunk cost) on commitment to medical treatment was investigated. Three studies were run investigating the influence of sunk cost in the form of money, time, and effort. A total of 637 participants (314 male) with a mean age of 19.58 years were recruited from an undergraduate population. A computer program simulated the process of arranging a course of physiotherapy. Participants invested one of three amounts of sunk cost (under budget, on budget, or over budget) into arranging sessions with a chiropractor. Participants then decided how much time they wished to commit to these chiropractor sessions or to an alternative treatment with a better chance of success. Results revealed a significant effect of invested money, a significant effect of invested effort, but no effect of invested time. Invested money produced a sunk cost effect, while invested effort appeared to exert influence via cognitive dissonance. The implications for healthcare decision-making are discussed.     

Inventor perseverance after being told to quit: the role of cognitive biases

We find that approximately one third (29%) of independent inventors continue to spend money and 51% continue to spend time on projects after receiving highly diagnostic advice to cease effort. Using survey data from actual inventors, this paper studies the role of overconfidence, optimism, and the sunk‐cost bias in these decisions. We find that inventors are more overconfident and optimistic than the general population. We also find that optimism and past expenditures increased perseverance after being told to quit, while overconfidence in judgment ability had no effect. After being told to quit, optimists spend 166% more than pessimists and those having already spent, for example, $10 000 spend another $10 000. Copyright © 2007 John Wiley & Sons, Ltd.     

Sunk Cost and Commitment to Dates Arranged Online

The influence of prior, irretrievable, investment (sunk cost) on commitment to a date arranged online was investigated. Participants were recruited from an undergraduate population. There were 145 participants (86 female) with a mean age of 19.42 years. Participants took part in a computer simulation of the process of arranging a date online. Participants invested one of five amounts of sunk cost into this process. Participants were then presented with the choice of attending the date arranged online or attending a (superior) blind date. Participants chose how much time that they wanted to commit to the (inferior) date arranged online. Results revealed a significant sunk cost effect (p = 0.003). The implications of the sunk cost effect having an influence over human relationships are discussed.     

Sunk Cost,Emotion, and Commitment to Education

The influence of prior, irretrievable, investment (sunk cost) on commitment to a course of education was investigated. The moderating effects of the emotions of anger and fear over this commitment decision were also investigated. A total of 425 participants (214 male) with a mean age of 19.92 years were recruited from an undergraduate population. A computer program simulated the process of arranging to undertake a course of education. Participants were induced to feel either anger or fear and, then, invested one of three amounts of sunk cost (under budget, on budget, or over budget) to signing up for a course. Participants then decided how much time they wished to commit to this course or to an alternative, identical course with a better chance of success. Results revealed a significant sunk cost effect of prior investment on commitment to a course of education. Results also revealed that anger increased the magnitude of this sunk cost effect. Results did not reveal any effect of fear on the sunk cost effect. Theoretical implications and practical applications were discussed.     

The sunk cost effect in pigeons and humans

The sunk cost effect is the increased tendency to persist in an endeavor once an investment of money, effort, or time has been made. To date, humans are the only animal in which this effect has been observed unambiguously. We developed a behavior-analytic model of the sunk cost effect to explore the potential for this behavior in pigeons as well as in humans. Each trial started out with a short expected ratio, but on some trials assumed a longer expected ratio part way through the trial. Subjects had the (usually preferable) option of "escaping" the trial if the longer expected ratio had come into effect in order to bring on a new trial that again had a short expected ratio. In Experiments 1 through 3, we manipulated two independent variables that we hypothesized would affect the pigeons' ability to discriminate the increase in the expected ratio within a trial: (a) the presence or absence of stimuli that signal an increase in the expected ratio, and (b) the severity of the increase in the expected ratio. We found that the pigeons were most likely to persist nonoptimally through the longer expected ratios when stimulus changes were absent and when the increase in the expected ratio was less severe. Experiment 4 employed a similar procedure with human subjects that manipulated only the severity of the increase in the expected ratio and found a result similar to that of the pigeon experiment. In Experiment 5, we tested the hypothesis that a particular history of reinforcement would induce pigeons to persist through the longer expected ratios; the results suggested instead that the history of reinforcement caused the pigeons to persist less compared to pigeons that did not have that history.     

Sunk cost: pigeons (Columba livia), too, show bias to complete a task rather than shift to another

The sunk cost effect involves the bias to stay with an alternative because one has already invested resources, even when there is a better alternative available. In a series of experiments, at various points during a 30-peck requirement, pigeons (Columba livia) could choose between completing the response requirement (at a different location in Experiment 1 or the same location in Experiments 3 and 4) and switching to a constant number of pecks. In three experiments, the pigeons showed a bias to complete the pecks already started, even when that required more pecking. We also demonstrated that the bias depended on the initial investment and was not produced merely because the pigeons preferred a variable alternative over a fixed alternative. The deviation from optimal choice suggests that pigeons show a bias similar to the sunk cost effect in humans.     

Is there a Sunk Cost Effect in Committed Relationships?

The sunk cost effect occurs when a prior investment in one option leads to a continuous investment in that option, despite not being the best decision. The aim of the present paper was to study the role of the sunk cost effect in committed relationships. In Experiment 1, participants (N = 902) were presented with an unhappy relationship scenario in which they needed to make a choice: to stay or end the relationship. Results showed that the likelihood of participants staying in the relationship was higher when money and effort, but not time, had been previously invested in that relationship. In Experiment 2, the time investment was manipulated and the sunk cost was evaluated using a different methodology. Specifically, instead of having a dichotomous decision, participants (N = 275) choose how much time they would be willing to invest in the relationship. Results revealed a sunk time effect, that is, participants were willing to invest more time in a relationship in which more time had already been invested.     

The role of probability of success estimates in the sunk cost effect

The sunk cost effect is manifested in a tendency to continue an endeavor once an investment has been made. Arkes and Blumer (1985) showed that a sunk cost increases one's estimated probability that the endeavor will succeed [p(s)]. Is this p(s) increase a cause of the sunk cost effect, a consequence of the effect, or both? In Experiment 1 participants read a scenario in which a sunk cost was or was not present. Half of each group read what the precise p(s) of the project would be, thereby discouraging p(s) inflation. Nevertheless these participants manifested the sunk cost effect, suggesting p(s) inflation is not necessary for the effect to occur. In Experiment 2 participants gave p(s) estimates before or after the investment decision. The latter group manifested higher p(s), suggesting that the inflated estimate is a consequence of the decision to invest. Copyright © 2000 John Wiley & Sons, Ltd.     

沉没成本效应中的心理学问题

沉没成本效应是一种常见的非理性行为。本文从心理学角度对其进行了系统地介绍。文章概括了沉没成本及沉没成本效应的定义,沉没成本的种类和发生领域,并用心理学理论对沉没成本效应进行了解释。此外．文章还讨论了沉没成本的逆效应以及影响沉没成本效应的主要因素。     

Blind to Bias? Young Children Do Not Anticipate that Sunk Costs Lead to Irrational Choices

Young children anticipate that others act rationally in light of their beliefs and desires, and environmental constraints. However, little is known about whether children anticipate others’ irrational choices. We investigated young children's ability to predict that sunk costs can lead to irrational choices. Across four experiments, 5- to 6-year-olds (total N = 185) and adults (total N = 117) judged which of two identical objects an agent would keep, one obtained at a high cost or one obtained at a low cost. In Experiment 1, adults predicted that the agent would choose the high-cost object over the low-cost one, whereas children responded at chance. Experiment 2 replicated these findings in children, but also included another condition which showed they were sensitive to future costs. They predicted that an agent would be more likely to seek out a low-cost item than a high-cost item. Experiments 3 and 4 then found that children do not anticipate the sunk cost bias in first person scenarios, or in interpersonal sunk cost scenarios, where costs are sunk by others. Taken together, our findings suggest that young children may struggle to understand and predict irrational behavior. The findings also reveal an asymmetry between how they consider sunk costs and future costs in understanding actions. We propose that this asymmetry might arise because children do not consider sunk costs as wasted.     

The discounting of ambiguous information in economic decision making

In three experimental studies we investigated how decision makers respond to ambiguous information about costs and benefits. In Experiment 1, we studied the effect of ambiguity about prior costs. Experiments 2 and 3 focused on the effect of ambiguity about future outcomes. The collective results of the three studies suggest that decision makers discount ambiguous information. The findings are related to insights on the disjunction effect, the sunk cost effect, transaction decoupling, and ambiguity aversion. Copyright © 2003 John Wiley & Sons, Ltd.     

The sunk cost effect with pigeons: some determinants of decisions about persistence

The sunk cost effect occurs when an individual persists following an initial investment, even when persisting is costly in the long run. The current study used a laboratory model of the sunk cost effect. Two response alternatives were available: Pigeons could persist by responding on a schedule key with mixed ratio requirements, or escape by responding on a second key. In Experiment 1, mean response requirements for persistence and escape were varied across conditions. Pigeons persisted (committing the sunk cost error) when persisting increased the mean response requirement only slightly but not when persisting was sufficiently nonoptimal. Experiment 2 explored more systematically combinations of ratios and probabilities assigned to the schedule key. Persistence varied with the ratio of the mean global response requirements for persistence and escape. In Experiment 3, transitions between ratios were signaled. This reduced nonoptimal persistence, and produced some instances of a reverse sunk cost error--escaping when persistence was optimal. In Experiment 4, it was optimal to escape after the second-smallest ratio ever presented. Pigeons escaped at approximately the optimal juncture, especially in conditions with added signals. Overall, this series of experiments suggests that the sunk cost error may arise in part because persistence is the default behavioral strategy in situations where the contingencies for escape and persistence are insufficiently disparate and/or it is relatively difficult to discriminate when to escape. The study also demonstrates the utility of animal models of complex decision making situations.     

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.