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The sunk-cost effect (SCE) is reduced when decisions harm others, suggesting ethical considerations can mitigate this bias. This finding impacts understanding real-world investment decisions.

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Area of Science:

  • Behavioral Economics
  • Social Psychology
  • Decision Science

Background:

  • The sunk-cost effect (SCE) describes persisting with failing investments due to prior commitment.
  • Ethical considerations, particularly the ethic of care, may influence decision-making biases.
  • Previous research has not extensively explored the interplay between SCE and ethical obligations.

Purpose of the Study:

  • To investigate how the ethic of care moderates the sunk-cost effect.
  • To determine if continuing an investment that harms others reduces the SCE.
  • To examine the interpersonal dimension of the SCE.

Main Methods:

  • Three experiments were conducted to test the interaction between sunk costs and the ethic of care.
  • Experiment 1 examined the SCE with harmful consequences.
  • Experiment 2 explored the interpersonal SCE using vignettes.
  • Experiment 3 employed Bayesian sequential hypothesis testing for robust analysis.

Main Results:

  • A significant interaction was found: the SCE was smaller when sunk-cost decisions led to harm.
  • Experiment 1 and 3 provided evidence for the moderating effect of the ethic of care.
  • An interpersonal SCE was observed, but the interaction effect was not consistently replicated across all experiments.

Conclusions:

  • Violating the ethic of care appears to de-bias decision-making by diminishing the influence of sunk costs.
  • Ethical considerations can override or reduce cognitive biases like the SCE.
  • Findings offer insights into complex real-world decisions involving significant investments and potential harm.