The psychology of sunk cost PDF
Added on 2021-09-24
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Running head: Sunk Cost 1
THE PSYCHOLOGY OF SUNK COST.
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THE PSYCHOLOGY OF SUNK COST.
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The psychology of sunk cost 2
Arkes, H. R., & Blumer, C. (1985). The psychology of sunk cost. Organizational behaviour
and human decision processes, 35(1), 124-140.
The article “The psychology of sunk cost” by Arkes and Blumer seeks to explain the
irrational economic behaviour of sunk cost effect. These effect is often manifested greatly
where a person continues on an endeavour once the person has invested effort, time or
money. The motivator to the continuation of the present decision is the prior investment, and
this happens even though it does not have to influence the decision. Therefore, the article
aims to give prove on the psychological justification as this behaviour is based on the need of
not appearing wasteful.
Arkes and Blumer analysed the sunk cost effect using three stages. First was the
demonstration of how the outcome will be presented followed by explanations to those
effects and finally the relation that exists between the sunk social psychological research and
cost effect. They demonstrated the sunk cost effect using ten experiments which were
conducted on Ohio and Oregon college students. The first experiment involved the giving
subscribers’ discounts to subscribers to a theatre series in Wisconsin and Michigan with the
expectation that most people will buy tickets to Wisconsin. However, it disconfirmed the
economic theory used traditionally that all the subjects will choose Wisconsin trip.
The second experiment involved selling three tickets with the first having the normal
price of $15, second with $2 discount and the third at $7 discount. The results demonstrated
possession of different sunk costs though it lasted for only six months. Experiment 3 involved
asking two kinds of questions to respondents whether there should be a continuation in
investing in a project where millions have already been spent and the other where no money
had yet been invested. From the respondents, most of them preferred continuing spending
than the beginning.
Arkes, H. R., & Blumer, C. (1985). The psychology of sunk cost. Organizational behaviour
and human decision processes, 35(1), 124-140.
The article “The psychology of sunk cost” by Arkes and Blumer seeks to explain the
irrational economic behaviour of sunk cost effect. These effect is often manifested greatly
where a person continues on an endeavour once the person has invested effort, time or
money. The motivator to the continuation of the present decision is the prior investment, and
this happens even though it does not have to influence the decision. Therefore, the article
aims to give prove on the psychological justification as this behaviour is based on the need of
not appearing wasteful.
Arkes and Blumer analysed the sunk cost effect using three stages. First was the
demonstration of how the outcome will be presented followed by explanations to those
effects and finally the relation that exists between the sunk social psychological research and
cost effect. They demonstrated the sunk cost effect using ten experiments which were
conducted on Ohio and Oregon college students. The first experiment involved the giving
subscribers’ discounts to subscribers to a theatre series in Wisconsin and Michigan with the
expectation that most people will buy tickets to Wisconsin. However, it disconfirmed the
economic theory used traditionally that all the subjects will choose Wisconsin trip.
The second experiment involved selling three tickets with the first having the normal
price of $15, second with $2 discount and the third at $7 discount. The results demonstrated
possession of different sunk costs though it lasted for only six months. Experiment 3 involved
asking two kinds of questions to respondents whether there should be a continuation in
investing in a project where millions have already been spent and the other where no money
had yet been invested. From the respondents, most of them preferred continuing spending
than the beginning.
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