Sunk Cost as a Self-Management Device

• 成果类型: Article
• 署名作者: Hong, Fuhai; Huang, Wei; Zhao, Xiaojian
• 署名单位: Lingnan University; Nanyang Technological University; Chinese University of Hong Kong; The Chinese University of Hong Kong, Shenzhen; Monash University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2018.3032
• 发表日期: 2019
• 页码: 2216-2230
• 关键词: Sunk cost; limited memory; present bias; COORDINATION; signaling

摘要

The sunk cost effect has been widely observed in individual decisions. Building on an intrapersonal self-management game, the paper theoretically shows that the sunk cost effect may stem from an attempt to overcome the underinvestment problem associated with a high degree of present bias or to resolve the multi-selves coordination problem when the degree of present bias is low. Especially for individuals with severe present bias, the current self may take a costly action (which is a sunk cost for the future self) to signal the individual's high success probability that motivates his future self-disciplining behaviors. In equilibrium, a higher level of sunk cost is more likely to give rise to a higher probability for the individual to continue the project. We then conduct a laboratory experiment. The empirical findings are consistent with our theoretical implications.