Abstract
This paper reports on a laboratory experiment aiming at documenting the sunk-cost fallacy in individual decision-making and at identifying the role of the cognitive ability in its manifestation. For this purpose, the design rules out loss aversion and cognitive dissonance, identified by the literature as being the main psychological drivers of the bias. The sunk-cost fallacy is identified by comparing a low and a high sunk-cost treatment, respectively, against a control group that does not incur a sunk cost. There is evidence of a weak manifestation of the sunk-cost fallacy, which is statistically significant only for the high sunk-cost treatment. However, strong evidence of the fallacy was found among the high-cognitive-ability subjects. Finally, although cognitive ability is predictive of status-quo bias, it was not found to reduce the sunk-cost bias.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.