Motivational Reasons for Biased Decisions: The Sunk-Cost Effect’s Instrumental Rationality

Abstract

The present study describes the mechanism of need regulation, which accompanies the so-called “biased” decisions. We hypothesized an unconscious urge for psychological need satisfaction as the trigger for cognitive biases. In an experimental study (N = 106), participants had the opportunity to win money in a functionality test. In the test, they could either use the solution they had developed (sunk cost) or an alternative solution that offered a higher probability of winning. The selection of the sunk-cost option (SCO) was the most chosen option, supporting the hypothesis of this study. The reason behind the majority of participants choosing the SCO seemed to be the satisfaction of psychological needs, despite a reduced chance of winning money. An intervention, which aimed at triggering self-reflection, had no impact on the decision. The findings of this study contribute to the discussion on the reasons for cognitive biases and their formation in the human mind. Moreover, it discusses the application of the label “irrational” for biased decisions and proposes reasons for instrumental rationality, which exist at an unconscious, need-regulative level.

Eristic reasoning: Adaptation to extreme uncertainty

“…As such, while eristic reasoning is not intendedly rational as it does not involve calculative reasoning, we recognize that eristic reasoning can be rational from the point of view of instrumental rationality (cf. Domeier et al, 2018 ) in the sense that eristic reasoning can be instrumental for hedonic aims. Yet, even hedonic gains such as emotional relief can be more appropriately pursued by solving the problem at hand realistically through intendedly rational methods rather than by producing self-serving conclusions through eristic reasoning.…”

Who Goes First? Influences of Human-AI Workflow on Decision Making in Clinical Imaging

“…While these cognitive forcing functions were found to increase performance measures and decrease AI reliance, they did so at the expense of additional time required for decision making [30]. Findings from other studies indicate that it is difficult for humans to revise or reverse their decisions due to psychological phenomena of sunk cost effects [2,23], cognitive dissonance [26], and confirmation bias [51,65]. Moreover, Kirkebøen et al [50] find that decision reversals are associated with higher levels of post-outcome regret despite improved outcomes or predictive performance.…”

Product returns in omni-channel retailing

“…We expected that threshold-based free shipping would increase returns for two reasons. The first reason is irrational customer behavior with regards to sunk cost (Domeier et al, 2018). Shipping fees are non-refundable and therefore a sunk cost when returning.…”

“…When customers decide to return their order, they have to write off the money spent on shipping fees. Instead, they have a tendency to continue on their path, once an investment has been made, even if it results in financially detrimental outcomes (Carter et al, 2007;Domeier et al, 2018). We expect customers to consider shipping fees as money wasted when returning and therefore expect them to return less with fixed-fee shipping, where shipping is always paid, than with threshold-based free shipping, where shipping is regularly free.…”