Processing mode and processing contents in older and younger adults’ sunk cost decision-making

Huai, Qichen; Liu, Xueping; Peng, Huamao

doi:10.1007/s12144-022-03524-x

Cited by 2 publications

(1 citation statement)

References 42 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Jain and Chen [19] investigate its implications in pricing decisions, and Ma [20] studies its effect on car insurance policyholders' behavior. Moreover, age-related differences in sunk cost decision making are highlighted by Huai et al [21], while leadership skills in mitigating the sunk cost fallacy are emphasized by Smith [22]. Additionally, neural mechanisms underlying sunk cost effects are revealed by Wang et al [23], and consumer behavior tendencies in life insurance pricing are uncovered by Carson et al [24].…”

Section: Literature Reviewmentioning

confidence: 99%

A Revisit to Sunk Cost Fallacy for Two-Stage Stochastic Binary Decision Making

Tian,

Jiang,

Pang

et al. 2024

Mathematics

View full text Add to dashboard Cite

This paper undertakes a revisit of the sunk cost fallacy, which refers to the tendency of people to persist investing resources into something, even if it is destined to have no good outcome. We emphasize that the utilities associated with different alternatives are not static for decision makers, which is exactly opposite to the traditional perspective. This paper argues that the utility of an option may change due to the choice of another option, suggesting that decisions considered irrational by the traditional analytical method, i.e., sunk cost fallacy, may be rational. We propose a novel analytical method for decision making with sunk cost when considering the utility change and validate the effectiveness of this method through mathematical modeling and computational experiments. This paper mathematically describes such decision-making problems, analyzing the impact of changes in the utilities across different alternatives on decision making with a real-world example. Furthermore, we develop a two-stage stochastic optimization model for such decision-making problems and employ the sample average approximation (SAA) method to solve them. The results from computational experiments indicate that some decisions traditionally considered irrational are, in fact, rational when the utility of an option changes as a result of choosing another option. This paper, therefore, highlights the significance of incorporating utility changes into the decision-making process and stands as a valuable addition to the literature, offering a refreshed and effective decision-making method for improved decision making.

show abstract