Getting older isn’t all that bad: Better decisions and coping when facing “sunk costs”.

Abstract

Because people of all ages face decisions that affect their quality of life, decision-making competence is important across the life span. According to theories of rational decision making, one crucial decision skill involves the ability to discontinue failing commitments despite irrecoverable investments also referred to as ‘sunk costs.’ We find that older adults are better than younger adults at making decisions to discontinue such failing commitments especially when irrecoverable losses are large, as well as at coping with the associated irrecoverable losses. Our results are relevant to interventions that aim to promote better decision-making competence across the life span.

What were they thinking? Reducing sunk-cost bias in a life-span sample.

“…Although the pathway through negative affect was not significant, its association with greater willingness to cancel the failing plan is consistent with research suggesting that people deescalate commitment to escape negative emotions (Ku, 2008; Wong et al, 2006; Wong & Kwong, 2007). For past losses, our results contrast with the idea that concerns about “waste” underlie sunk-cost bias (Arkes & Ayton, 1999; Hastie & Dawes, 2001) and that the ability to avoid rumination about losses facilitates canceling failing plans (Bruine de Bruin et al, 2014). Being halfway to a vacation destination (the scenario we used) may not have been seen as sufficient progress toward completion to foster concerns about waste or loss (Garland & Conlon, 1998; Sleesman et al, 2012).…”

“…Thus, the effectiveness of interventions did not differ by age. The greater willingness of older adults to cancel a failing plan replicates research using the same (Bruine de Bruin et al, 2014) and a larger, different set of scenarios, including ones that portray sunk costs as distinct from project completion (Bruine de Bruin et al, 2012; Strough et al, 2008; Strough, et al, 2011b). Thus, when dealing with sunk costs, older age appears to provide an advantage although an intervention can still boost performance.…”

“…You feel that you would have a much better weekend at home. You think that it is ‘too bad’ you already drove halfway, because you would much rather spend the time at home.” Prior research showed that older adults were better able to terminate the failing plan, and that this age difference was not attributable to age differences in valuing travel (Bruine de Bruin et al, 2014). As is often true in real-world situations (Garland & Conlon, 1998), information about having driven halfway simultaneously served as information about the “sunk cost” and progress toward “project completion,” allowing for varying interpretations.…”

“…A growing number of studies have tested this idea (Del Missier et al, 2013; Hess, Osowski, & Leclerc, 2005; Hess et al, 2013; Mikels, Cheung, Cone, & Gilovich, 2012). Emotion regulation was important for understanding why older adults made better decisions about sunk costs (Bruine de Bruin et al, 2014; Strough, Schlosnagle & DiDonato, 2011b). Older adults’ experience, as assessed by measures of crystallized intelligence and financial literacy, facilitated good financial decisions despite cognitive declines (Li, Baldassi, Johnson & Weber, 2013; Li, Gao, Kavali, Zaval, Johnson, & Weber, 2014).…”

Choosing to be happy? Age differences in “maximizing” decision strategies and experienced emotional well-being.

“…Third, it is also possible that older adults have learned from experience with previous life decisions that striving for the very best poses threats to their emotional well-being that they are motivated to avoid. Indeed, it has been argued that older adults may have learned insights relevant to decision making from life experience (Bruine de Bruin, Strough, & Parker, 2014; Li, Baldassi, Johnson, & Weber, 2013; Li, Goa, Enkavi, Zaval, Weber, & Johnson, 2015; Yates & Patalano, 1999). …”