Learning lessons from sunk costs.

Abstract

Study participants rated the quality of several arguments for continuing an original plan in sunk cost situations in order to (a) avoid wasting resources, (b) learn to make better decisions, (c) punish poor decision making, and (d) appear consistent. The lesson-learning argument was perceived as most appropriate when adult teachers taught lessons to others, the original decision was carelessly made, or if it consumed comparatively more resources. Ratings of the lesson-learning argument were higher for teacher–learner than for adult-alone situations, regardless of whether the learner was a child or an adult. The implications for improving decision making and judging whether the sunk cost effect is a bias are discussed.

Rationality in medical treatment decisions: is there a sunk-cost effect?

“…It is not uncommon to study decision making by haying participants evaluate others' behavior, in both non-medical (Baron, 1994) and medical domains (Gruppen et al, 1994). The sunk cost literature has failed to fi nd differences in participants' judgments depending on whether they are asked to make decisions themselves or to evaluate another's decisions (Arkes and Blumer, 1985;Bornstein and Chapman, 1994).…”

“…The four non-medical scenarios were taken from those used previously by Bornstein and Chapman (1994); see Appendix A for a sample scenario. Four medical scenarios were created such that each scenario presented an ongoing plan and an alternative course of action, as in the non-medical scenarios.…”

“…The sunk cost effect has been shown to be a robust cognitive bias in a variety of non-medical domains, such as personal decisions (Arkes and Blumer, 1985;Bornstein and Chapman, 1994), investment decisions in business (Staw, 1976;Garland, 1990), and employee performance evaluations (Bazerman et al, 1982). A number of reasons may underlie decision makers' sunk cost behavior (Bornstein and Chapman, 1994).…”

“…A number of reasons may underlie decision makers' sunk cost behavior (Bornstein and Chapman, 1994). The most commonly cited reason for why people display /' the sunk cost effect is the desire not to waste already expended resources (Frisch, 1993;Bornstein and Chapman, 1994).…”

“…One such reason is the desire to teach oneself (or another person) a lesson about how to make better decisions in the future; another possible reason is the desire to appear consistent in one's decisions. Learning a lesson is especially likely to come into play when one person is making a decision on behalf of another (e.g., a parent deciding what a child should do), as opposed to making a decision for oneself (Bornstein and Chapman, 1994). Consistency is an especially important motivation for sunk cost behavior when decision makers are induced to justify their decisions, either publicly or privately (Bobocel and Meyer, 1994).…”