Social and Behavioral Sciences Commons^™

Investment Decisions By Individuals And Groups In 'Sunk Cost' Situations: The Potential Impact Of Shared Representations, Christine M. Smith, R. S. Tindale, Linda Steiner

Peer Reviewed Articles

Past research has shown that individuals prefer to continue investing resources into a failing endeavor once a considerable investment has been made, even when abandoning the project would be more rational economically. This phenomenon has been labeled the sunk cost effect (Arkes & Blumer, 1985). Since investment decisions are often made by groups, we compared individual and group propensities for falling prey to the sunk cost effect. we also varied whether or not individuals and groups needed to justify their investment decision to a superior. Both individuals and groups showed the sunk cost effect. Group process analyses showed that error-prone …