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Experimental Economics

, Volume 10, Issue 1, pp 79–104 | Cite as

Searching for the sunk cost fallacy

  • Daniel Friedman
  • Kai Pommerenke
  • Rajan Lukose
  • Garrett Milam
  • Bernardo A. Huberman
Article

Abstract

We seek to isolate in the laboratory factors that encourage and discourage the sunk cost fallacy. Subjects play a computer game in which they decide whether to keep digging for treasure on an island or to sink a cost (which will turn out to be either high or low) to move to another island. The research hypothesis is that subjects will stay longer on islands that were more costly to find. Eleven treatment variables are considered, e.g. alternative visual displays, whether the treasure value of an island is shown on arrival or discovered by trial and error, and alternative parameters for sunk costs. The data reveal a surprisingly small sunk cost effect that is generally insensitive to the proposed psychological drivers.

Keywords

Sunk costs Sunk cost fallacy Search Self-justification Loss aversion 

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Supplementary material

10683_2006_9134_MOESEM1_ESM.doc (42 kb)
Matlab code
10683_2006_9134_MOESEM2_ESM.doc (30 kb)
Appendix B: Short Instructions for Treasure Hunt Game
10683_2006_9134_MOESEM3_ESM.zip (3.4 mb)
Electronic supplementary material

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Copyright information

© Economic Science Association 2006

Authors and Affiliations

  • Daniel Friedman
    • 1
  • Kai Pommerenke
    • 1
  • Rajan Lukose
    • 1
  • Garrett Milam
    • 1
  • Bernardo A. Huberman
    • 1
  1. 1.Department of EconomicsUniversity of CaliforniaSanta CruzUSA

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