Social and Behavioral Sciences Commons^™

The Effects Of Loss Aversion And Investment Type On The Sunk Cost Fallacy, Veronika Tait, Harold Miller Jr

FHSS Mentored Research Conference

The sunk-cost fallacy (SCF) occurs when an individual makes an investment with a low probability of a payoff because an earlier investment has already been made. It is considered an error because a rational decision maker should not factor in now-irretrievable investments, as they do not affect current-outcome likelihoods. Previous research has measured the tendency to commit the SCF by using hypothetical scenarios in which participants must choose to make a future investment or not after making an initial investment. Loss aversion, the preference for uncertain over certain losses, may be related to SCF. In this study, participants were asked …