The Interpersonal Sunk-Cost Effect.

Area of Science:

• Behavioral Economics
• Social Psychology
• Decision Science

Background:

• The sunk-cost fallacy, a deviation from rational decision-making, traditionally assumes individuals pursue inferior options due to their own past, irrecoverable investments.
• Existing research primarily views the sunk-cost effect as an intrapersonal phenomenon, driven solely by the decision-maker's personal history of resource allocation.

Purpose of the Study:

• To investigate whether the sunk-cost effect extends beyond personal investments to encompass the past investments of others.
• To determine if individuals exhibit sunk-cost effects based on costs borne by other people.

Main Methods:

• Conducted eight diverse experiments involving a total of 6,076 participants.
• Examined decision-making scenarios where participants responded to past investments made by others, not themselves.

Main Results:

• Documented significant sunk-cost effects even when the nonrecoverable costs were incurred by someone other than the decision-maker.
• Demonstrated that this interpersonal sunk-cost effect is robust and not influenced by the social closeness between individuals.
• Found that the effect persists regardless of whether others are aware that their sunk costs are being considered.

Conclusions:

• The sunk-cost fallacy operates as an interpersonal phenomenon, extending beyond individual past investments.
• This research uncovers a novel bias, significantly broadening the understanding of the sunk-cost effect.
• Findings challenge existing theoretical frameworks and highlight the pervasive nature of sunk-cost considerations in human judgment.