The impact of sunk costs and path dependencies on nonfarm employment of smallholder rubber farmers: Evidence from Southwest China

This paper reexamines the Big Push mechanism from a dynamic perspective by emphasizing timing and uncertainty rather than coordination failure. While the traditional Big Push literature attributes delayed structural transformation to complementarities across firms or industries, we reformulate the Big Push as an optimal timing problem faced by a forward-looking firm under uncertainty. The firm earns a stable profit in an incumbent market and can irreversibly switch to a new market characterized by perfect competition by incurring a sunk cost. The profitability of the new market depends on a stochastic demand parameter, generating an option value of waiting. We derive a threshold-based switching rule and show that greater uncertainty or an increase in the number of firms delays entry by increasing the value of waiting, even when the expected profitability of the new market improves over time. As a result, prolonged inertia and abrupt structural change can arise without coordination failure. The analysis offers a new interpretation of development traps and highlights the importance of timing and irreversibility in understanding structural transformation.

ABSTRACT This research compares the relative effectiveness of different uncertainties, including contractual, economic, and political uncertainty, on market entry in a sample of more than 100 countries. Whereas the bearing of various uncertainties on entrepreneurship has been previously studied, the consideration of contractual uncertainty and its comparisons with other uncertainties is novel. The theoretical roots of this work are grounded in the literature on entry-exit decisions under uncertainty, the role of sunk costs, capital durability, and incomplete/exclusive contracts. We find that greater contractual uncertainty discourages entry, while greater political stability encourages it. The effect of economic uncertainty on entry is statistically insignificant. Further, while the effect of the ease of entry on entrepreneurial entry is positive, it lacks statistical significance. The presence of knowledge workers promotes entrepreneurial entry. Finally, the level of economic prosperity fails to have a statistically significant impact on market entry. This insignificance is also true for market size and the intensity of local competition. These findings are robust to a battery of iterations, including considerations of nonlinearities and accounting for the presence of outliers. Thus, contractual uncertainty seems to matter more than economic uncertainty in the context of market entry, while political certainty has the expected result.

ABSTRACT Collaboration among stakeholders is crucial for prefabricated construction (PC) development. However, stakeholders’ self-interest and bounded rationality lead to dynamic adjustments in strategy, resulting in fragmented design-production-construction chains. Therefore, this study innovatively constructed a tripartite evolutionary game model involving the main stakeholders, including contractors, designers, and manufacturers, while considering reward, punishment, and trust (defined as the perceived reliability of counterpart commitments). By investigating strategy interactions and behavioral evolution trends under different scenarios, and employing MATLAB for computational simulations, the study yields key insights: (1) Sustained collaboration hinges on substantial incremental gains from joint efforts; (2) Designers are more cost-sensitive, while manufacturers, with higher sunk costs, demand larger benefit shares and rely more on trust; (3) When initial gains are unclear, contractors should prioritize temporary subsidies to manufacturers; penalties work best moderately due to diminishing marginal utility; (4) Trust-building is role-specific: manufacturers need more trust from partners, designers value early contractor trust, and trust synergizes with incentives but is irreplaceable long-term. This research provides empirically and theoretically grounded strategy recalibration frameworks for contractors, enabling evolution-informed optimization of tripartite collaborative governance in PC.

To the depths of the sunk cost: Experiments revisiting the elusive effect

Purpose: The study aims to identify the shared psychological underpinnings of brand loyalty in marketing and portfolio loyalty in behavioral finance by clarifying their theoretical foundations, common mechanisms, and cross-domain implications. It further examines how emotional bonding, habitual behavior, and cognitive biases collectively shape persistent loyalty across consumer and investor decision contexts. This study integrates the marketing and behavioral finance literatures to underscore the importance of conceptualizing loyalty within a unified psychological framework. Method: An interdisciplinary conceptual review synthesizes theoretical perspectives from marketing, consumer psychology, and behavioral finance. The qualitative analysis integrates cognitive–emotional mechanisms derived from commitment–trust theory, behavioral portfolio theory, and prospect theory to construct a unified understanding of loyalty processes. Findings: The results indicate that emotional attachment, habit formation, trust, perceived control, and risk perception function as core determinants of loyalty in both domains, while biases such as loss aversion, status quo bias, the endowment effect, and sunk cost reasoning produce analogous behavioral patterns. Loyalty programs and financial retention strategies similarly activate mechanisms that reduce uncertainty and reinforce psychological consistency. Conclusion: Brand and portfolio loyalty emerge through comparable cognitive–emotional pathways, suggesting a transferable psychological framework for understanding loyalty- driven behavior. These parallels provide actionable insights for designing interventions that strengthen loyalty while mitigating decision biases. Future research should empirically evaluate these mechanisms within digital decision environments and sustainability-oriented financial contexts.

This study investigates the operational strategies of low-cost carriers (LCCs) in the Gulf Cooperation Council (GCC) region, focusing on Wizz Air’s market entry and subsequent exit in the UAE. Utilizing the framework established by Schlumberger and Weisskopf (2014), the implications of sunk costs are explored, particularly in regulated environments characterized by unique economic factors. The aviation market in the UAE presents a unique landscape influenced by a range of rentier economics and competitive dynamics. Wizz Air’s entry into this market marked a notable deployment of a purist lean business model, distinct from legacy of the hub-and-spoke systems. This study seeks to analyze whether the decision-making processes of Wizz Air are affected by sunk costs and how these factors interact with LCC operations in the region. This study employs comparative analysis, benchmarking Wizz Air against peer European no-frills airlines, including Ryanair. Data was collected from industry reports, research publications, and financial statements, to assess the effectiveness of Wizz Air’s operational strategies and decision-making processes regarding its investment in the UAE. Evidence suggests a reverse sunk cost effect in Wizz Air's case; a behavioral phenomenon where the company’s initial substantial investments reduced the likelihood of continued financial commitment. This behaviour contradicts most behavioral economics literature on sunk cost fallacy, where escalation of commitment typically increases with sunk costs. The results indicate that Wizz Air’s reluctance to invest further in the UAE can be attributed to a calculated response to perceived risks and operational challenges unique to the Gulf market. This study concludes that Wizz Air’s exit from the UAE; displayed a behaviour based on rational disengagement arising from loss aversion, deeply rooted in the managerial decision-making processes.

Guzi refers to peripheral products derived from IPs of 2D cultural content, which also known as ACGN (Anime, Comic, Game, Novel). By using ethnographic observation, this study addresses a gap in the literature by applying classical behavioral economic frameworks—specifically, the theories of scarcity and the sunk cost fallacy—to the emerging hedonic economy and guzi economy. Consequently, this study demonstrate an analysis on how do consumers’ irrational behaviors and impulsive consumption in guzi economy be stimulated by the scarcity effect and the sunk cost fallacy.The results indicate that the business model of limited-edition merchandise systematically leverages scarcity effect to activate consumer characteristics, including the need for uniqueness, need for conformity, regret aversion and reactance. Besides, merchants strategically manipulate sunk cost perception through a high-connected approach: randomizing acquisition costs via blind boxes, inflating perceived value through artificial scarcity, obscuring financial outlays via digital payment systems, and ultimately outsourcing cost justification to consumers' emotional self-rationalization.

The research subject is the impact of cognitive biases on the efficiency of investment decisions within the real economy and how these biases can be integrated into financial control systems. The research methodology takes a comprehensive approach, combining regression analysis to identify statistical patterns with the Mamdani fuzzy inference system to model non-linear interactions between behavioural determinants. The empirical basis comprises 67 investment projects of Ukrainian enterprises for the period 2022–2024 and data collected via a structured questionnaire containing 45 questions designed to diagnose cognitive biases. The research objective is twofold: first, to identify the dominant behavioural determinants of investment decisions based on empirical analysis; and second, to develop tools for considering these determinants in the financial control systems of enterprises in the real sector. The research results demonstrate that cognitive biases systematically reduce the efficiency of investment projects. The Regression Model illustrates the detrimental effects of the sunk cost fallacy, overconfidence bias, the anchoring effect and herding behaviour on the discrepancy between the actual and planned NPV, accounting for 54.7% of the variation in the dependent variable. The most influential factors are the sunk cost fallacy (β = -1.40, p < 0.001) and the overconfidence bias (β = -1.05, p = 0.002). The developed Mamdani Model, which incorporates nine expert rules, enables the formalisation of nonlinear synergistic effects between biases and the identification of critical risk zones when combining high values of determinants. The correlation between the Mamdani Model and the regression results is 0.89 (p < 0.001), which confirms the validity of the fuzzy approach. The practical significance lies in creating operational tools for behavioural control with linguistic rules for diagnosing cognitive distortions when making investment decisions. These results can be used by the financial services departments of enterprises to improve control systems and reduce the impact of psychological factors on the quality of investment decisions.

This study investigates how consumer economic behavior changes in response to short-term, event-driven conditions, taking the “Season of Jerry” event in the virtual economy of Hypixel Skyblock as its focus. The research tracks spending, saving, and investment choices across four distinct phases: pre-event, immediate pre-event, event, and post-event, spanning December 1 to December 25, 2024. Six randomly selected players provided daily records of their financial activity in-game, which were then examined to identify recurring patterns and trends. The analysis shows that players who favored balanced strategies, built around reinvestment and the use of passive income methods, generally achieved more consistent and profitable results. By contrast, those who leaned heavily on speculative approaches or short-term consumption often experienced losses. Several real-world economic concepts could be observed in action within this virtual setting, including prospect theory, bounded rationality, and the sunk cost effect. While the modest sample size and the limitations of a game-based context make broad generalization difficult, the results suggest that virtual economies can serve as valuable environments for studying consumer behavior. They may also provide insights that are useful to educators, economists, and digital platform designers who are interested in decision-making under temporary shocks.

Oil and gas exploration and production require extensive materials and services that are critical to sustaining operations. Effective supply chain management ensures that operators maintain adequate stocks and service support; disruptions in any component of this chain can significantly hinder production. These materials and services span diverse categories, each with distinct importance to operational continuity. Because inputs in oil and gas production are costly, material requirements planning plays a central role in reducing inefficiencies. Excess inventories create sunk costs and waste both capital and operational expenditures. Therefore, optimizing the procurement, allocation, and utilization of materials and services is essential for minimizing costs while ensuring uninterrupted production and long-term organizational sustainability.

PT Hulu Sungai operates offshore Gas Block “M”, a critical offshore gas-producing asset that is experiencing production decline due to reservoir depletion. To sustain output and enhance recovery, PT Hulu Sungai is evaluating the deployment of low-low pressure (LLP) compressors across several offshore platforms to reduce wellhead pressure. However, updated reserve assessments show that only three out of four proposed platforms deliver positive Net Present Value (NPV), while the remaining one may result in sunk costs of up to USD 16 million if a compressor is deployed prematurely. This study develops a flexible, data-driven investment and procurement strategy, applying Real Options Analysis (ROA) to optimize compressor deployment by balancing economic feasibility, capital utilization, and technical readiness. The research addresses three primary questions. First, which platforms demonstrate economic viability based on updated reserves and production forecasts? Second, what is the potential for the marginal platform to achieve incremental recovery and positive NPV if a compressor is redeployed after 2026? Third, what deployment sequence and asset movement plan will maximize return on investment while minimizing the risk of stranded assets? The objectives include conducting NPV and IRR analyses, applying ROA to model flexibility, and proposing a staged deployment strategy that adjusts to evolving subsurface conditions. The findings confirm that three platforms are economically feasible for compressor installation between 2025 and 2027, each generating between USD 5 to 10 million in NPV. ROA supports the possibility of redeploying compressors to the marginal platform, which can convert a previously unviable investment into a profitable outcome if reserve updates support further development. Stakeholder feedback validates both the technical and logistical feasibility of redeployment. The proposed strategy enables PT Hulu Sungai to avoid up to USD 16 million in sunk costs and supports long-term value generation in Gas Block M.

Type of the article: Research ArticleAbstractInvestment efficiency is crucial for investors and creditors. This study examines whether managers of publicly traded manufacturing firms exhibit sunk-cost bias in capital expenditure decisions. Economic theory dictates that sunk costs – unrecoverable past expenditures – should be ignored in forward-looking decisions. Depreciation expense, which allocates historical capital expenditures under GAAP, represents such a sunk cost, yet limited empirical research tests whether it systematically influences capital replacement decisions.Using regression analysis with Compustat data for U.S. manufacturing firms from 2003–2024, we examine whether capital expenditures are predicted by past depreciation expenses, controlling for established economic determinants including Tobin’s Q, cash flow, growth opportunities, and firm characteristics. Manufacturing firms are selected due to their heavy reliance on capital assets and substantial depreciation expenses.The results provide strong evidence of sunk-cost bias: higher depreciation expense predicts significantly larger future capital investments, controlling for economic fundamentals. The depreciation coefficient is positive (0.0158) and highly significant (p < 0.01), contributing meaningfully to explained variance beyond traditional predictors. These findings suggest managers allow accounting allocations to influence economic decisions, affecting optimal asset replacement timing.The findings alert investors that managerial capital allocation may be suboptimal and influenced by accounting measures rather than purely economic considerations. This bias may cause over-investment when depreciation is high and under-investment when depreciation is low, potentially affecting firm value and competitive positioning.

This paper is an empirical study on the hot sales of mystery boxes under the framework of behavioral economics theory, which shows that "endowment effect, loss aversion, sunk cost, and uncertainty incentives" are the core factors of frequent purchase and addiction, which makes marketing change from traditional "persuasion" to "emotion-driven", and thus provides insight into the future that goods with higher emotional value are more likely to sell well.

In corporate management, the degree of synergy between budget management and performance appraisal directly impacts the efficiency of organizational resource allocation and the effectiveness of strategic implementation. According to the "Enterprise Budget Performance Management Development Report" released by the Chinese Academy of Fiscal Sciences, 60%-75% of enterprises experience a misalignment between budget targets and performance indicators. The resulting sunk costs average 10%-15% of an enterprise's annual budget, resulting in wasted resources and weakening the support provided by management tools for the business. Based on the balanced scorecard theory and dynamic budget management theory, this article explores optimization paths for a performance appraisal system based on budget management from five perspectives: current situation diagnosis, theoretical integration, technical support, mechanism innovation, and cultural support. The study found that enterprises currently face common problems such as unrealistic goal setting, unbalanced indicator design, and ineffective execution and monitoring. Deep integration of budget and performance can be achieved through strategies such as establishing a dynamic target adjustment mechanism, improving a multidimensional indicator system, strengthening ERP system technology capabilities, implementing quantitative management and control throughout the entire process, and promoting organizational cultural transformation. Practice has shown that the optimized system can improve resource allocation efficiency by about 20%, enhance corporate strategic execution, and provide reference management upgrade solutions for organizations of different sizes and industries. The relevant conclusions can be verified through industry statistics and theoretical practice.

With the growing intelligent and digital technologies, logistics experience has become a key factor in shaping customer loyalty in e-commerce. This paper investigates how JD.coms Hourly Delivery service, representing a leading example of smart logistics, influences users satisfaction, trust, and loyalty. Using simulated panel data of 2,0000 transactions and a mixed-methods approach, the study combines quantitative regression models with qualitative content analysis. The results show that delivery timeliness, fulfillment accuracy, and service reliability significantly enhance behavioral loyalty (repurchase rate and retention rate) and attitudinal loyalty (Net Promoter Score). On-time delivery and precise warehouse operations have the strongest positive influence, while short-term promotions effect is weak. Mechanism analysis based on sunk cost and switch cost theories suggests that users who experience on-time and reliable logistics services develop psychological and economic barriers to switching to other platforms. This research contributes to the literature by empirically connecting digital-intelligent logistics experiences with customer loyalty, which offers managerial insights to strengthen user retention through smart logistics systems.

This paper examines the impact of environmental protection investment and R&D investment on the financial performance of heavily polluting enterprises in China. Using panel data from listed companies in the Shanghai and Shenzhen stock markets from 2008 to 2018, the study constructs multiple regression models to analyze both short-term and long-term effects. The results show: (1) environmental protection investment significantly improves short-term financial performance, and its positive effect becomes stronger in lagged measures; (2) R&D investment enhances short-term financial performance but may hinder long-term performance due to its high risk and the potential for insufficient follow-up investment to become sunk costs; (3) controlling for R&D input reveals a positive synergistic effect: coordinated R&D and environmental investment amplifies the positive impact of environmental investment on performance. The paper concludes with recommendations for firms and policymakers to align green investment with sustained innovation strategies.

Community health is a long-established approach to accessing healthcare, the face of which is female. In the case of rural Isiolo, Kenya, the majority of community health volunteers are men. To understand why, we historicise the move to capitalist work economies in Kenya’s pastoralist north, offering a ‘step up’, ‘step down’ framework to explain the gendering of work in urban versus rural settings. We draw on demographic data from Isiolo’s ∼760 community health volunteers alongside qualitative interviews, focus group discussions and observations over 12 months, centring male perspectives. For rural men, such work promised an opportunity to ‘step up’ but did not realise security over time. Men nevertheless stayed in post owing to social pressures and sunk costs. To understand the frustrations and anger we witnessed among pastoralist men, we draw on Hodgson’s dual masculinities – one ‘modernist’, one longer-standing embodying autonomy and self-determination – that sit in tension in community health work. The costs of diversifying away from pastoralist livelihoods are keenly felt, a source of male angst and lower self-esteem. We conclude that our analysis doubles as a window on insecure, part-paid work in rural Kenya that has not served men well but also compounded gender inequity for women.

Objectives:To identify the most frequently-observed forms of cognitive bias among Health Information Professionals (HIPs) during decision-making processes. To determine if number of years in the profession influences the types of cognitive biases perceived in others' decisions.Method:This cross-sectional study invited participation of 498 elected and appointed leaders at the national, caucus, and chapter levels of the Medical Library Association. The 149 participants (32%) were presented with 24 cognitive biases often associated with expected decision-making contexts among HIPs.Results:The most frequently observed forms of cognitive bias in decision-making situations were: Status Quo, Sunk Costs, Novelty, Professionology, Authority, Worst-Case Scenario, and Group Think. Four of these overlapped with a previous 2007 study. Results were analyzed by length of years in the profession. Four forms of cognitive bias showed statistically significant differences in frequency by years in the profession: Authority, Naïve Realism, Overconfidence, and Status quo forms of cognitive bias.Discussion:This study identified commonly observed cognitive biases that interrupt decision-making processes. These results provide a first step toward developing solutions. Mitigation strategies for the seven most common forms of identified cognitive bias are explored with more general recommendations for all forms of cognitive bias. This study should guide the profession on the most commonly-perceived forms of cognitive bias occurring in decision-making environments with an eye upon possible mitigation strategies.

In corporate management, the degree of synergy between budget management and performance appraisal directly impacts the efficiency of organizational resource allocation and the effectiveness of strategic implementation. According to the "Enterprise Budget Performance Management Development Report" released by the Chinese Academy of Fiscal Sciences, 60%-75% of enterprises experience a misalignment between budget targets and performance indicators. The resulting sunk costs average 10%-15% of an enterprise's annual budget, resulting in wasted resources and weakening the support provided by management tools for the business. Based on the balanced scorecard theory and dynamic budget management theory, this article explores optimization paths for a performance appraisal system based on budget management from five perspectives: current situation diagnosis, theoretical integration, technical support, mechanism innovation, and cultural support. The study found that enterprises currently face common problems such as unrealistic goal setting, unbalanced indicator design, and ineffective execution and monitoring. Deep integration of budget and performance can be achieved through strategies such as establishing a dynamic target adjustment mechanism, improving a multidimensional indicator system, strengthening ERP system technology capabilities, implementing quantitative management and control throughout the entire process, and promoting organizational cultural transformation. Practice has shown that the optimized system can improve resource allocation efficiency by about 20%, enhance corporate strategic execution, and provide reference management upgrade solutions for organizations of different sizes and industries. The relevant conclusions can be verified through industry statistics and theoretical practice.