Are Older Adults Less Subject to the Sunk-Cost Fallacy Than Younger Adults?

Abstract

The sunk-cost fallacy is a decision-making bias that reflects the tendency to invest more future resources in a situation in which a prior investment has been made, as compared with a similar situation in which a prior investment has not been made (e.g., the tendency to spend more time watching a boring movie one paid to watch than to watch a boring, but free, movie). Most research on this fallacy has been conducted with college students (Arkes & Ayton, 1999). Although a growing number of studies have investigated the sunk-cost fallacy in children, adolescents (Klaczynski, 2001), and nonhuman animals (Navarro & Fantino, 2005), no research has investigated whether older adults are less likely than younger adults to commit the sunk-cost fallacy (cf. Bruine de Bruin, Parker, & Fischhoff, 2007). Drawing from prior research on age differences in negativity and positivity biases in information processing, we hypothesized that older adults would be less likely than younger adults to commit the sunk-cost fallacy. Soman (2004) offered loss aversion as a potential explanation for the sunk-cost fallacy. Supporting evidence comes from research in which young adults have reported that their sunk-cost decisions are motivated by loss avoidance (Frisch, 1993). This focus on losses may reflect younger adults’ negativity bias in information processing. Younger adults weigh negative information more heavily than positive information (Baumeister, Bratslavsky, Finkenauer, & Vohs, 2001). In contrast, older adults demonstrate a positivity effect (Carstensen & Mikels, 2005). Their decisions reflect a more balanced view of gains and losses (Wood, Busemeyer, Koling, Cox, & Davis, 2005). If older adults are less likely than younger adults to focus exclusively on losses, and loss aversion contributes to the sunk-cost fallacy, then older adults may be less likely than younger adults to commit the sunkcost fallacy.