Overview

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The Sunk Cost fallacy is a human tendency to be influenced by sunk costs: costs which cannot be recovered or influence future events. To make the best decisions, ideally people should ignore sunk costs, but in our daily lives and through cleverly planned experiments, we can see that most people are very susceptible to the fallacy.  See examples of the sunk cost fallacy in action, experiments which attempt to measure the effect, and learn about the neurological underpinnings of this pervasive phenomenon. 

 

This is the first part in a planned 2-part video series. The second video focuses on public policy applications and ideas which can be drawn from an understanding of the sunk cost effect. 

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Roles

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Direct, Film and Edit by Marina Luccioni.

In collaboration with Colin Camerer (Caltech) and Teck Hua Ho (National University of Singapore).

Many thanks for Colin and Teck's guidance and supervision, and to Sumit Agarwal (National University of Singapore), Eric Finkelstein (Duke-NUS), Hang Wu (National University of Singapore), Ivan Png (National University of Singapore), Khanh Do (Singapore Civil Service College) and Wai Yan Leong (Singapore Land Transport Authority) and Xing Zhang (Swiss Federal Institute of Technology) for their enthusiasm and support for the project. 

Music  ⓒ Audionautix (Soul Groove), Gunnar Olsen (Keep the Pace) and Youtube Audio Library (Where I am From)

 

Bibliography, in order of mention

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Ho, T. H., Png, I. P., & Reza, S. (2017). Sunk cost fallacy in driving the world’s costliest cars. Management Science.

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Hang Wu, Teck-Hua Ho & Xing Zhang (working paper) Searching for the Sunk Cost Fallacy: a Field Experiment 
 

Fujino, J., Fujimoto, S., Kodaka, F., Camerer, C. F., Kawada, R., Tsurumi, K., ... & Yamada, M. (2016).  Neural mechanisms and personality correlates of the sunk cost effect.  Scientific reports, 6, 33171.

 

Webley, P., & Plaisier, Z. (1998). Mental accounting in childhood. Citizenship, Social and Economics Education, 3(2), 55-64.

 

Roth, S., Robbert, T., & Straus, L. (2015). On the sunk-cost effect in economic decision-making: a meta-analytic review. Business research, 8(1), 99-138.

 

Just, D. R., & Wansink, B. (2011). The flat-rate pricing paradox: conflicting effects of “all-you-can-eat” buffet pricing. The 
Review of Economics and Statistics, 93(1), 193-200.

 

Camerer, C. F., & Weber, R. A. (1999). The econometrics and behavioral economics of escalation of commitment: A re-examination of Staw and Hoang’s NBA data. Journal of Economic Behavior & Organization, 39(1), 59-82.