Abstract
In classic economic literature, decisions based on unrecoverable past investments instead of future gains are considered fallacies. They are known as the sunk-cost fallacy in humans and Concorde fallacy in other animals. Here, we argue that the aforementioned fallacies may in fact reflect adaptive heuristics, as well as that the evolutionary novelty of the dilemmas used in previous studies caused these seemingly suboptimal decisions. We hypothesized that (a) because humans are social animals, the tendency to keep investing should be stronger in social than non-social context (because consequences of such decisions might influence one’s reproductive success) and (b) if it is indeed an adaptive heuristic, the decision to keep investing should require less cognitive effort than the decision to terminate further investments. To test this, we developed several domain-specific tasks. Participants had to decide whether to stop or continue investing into an unprofitable project such as a business investment, romantic partnership, friendship, and sibling relationship. The time needed to reach a decision was used as an objective measure of cognitive effort. The pattern of responses was similar for social scenarios, where a majority of participants decided to prolong the investment. Immediate termination of any further investments was likeliest in the business scenario. Furthermore, participants were faster in reaching the decision to keep investing than the decision to terminate further investments, thus corroborating the notion that the decision to keep investing requires less cognitive effort.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Ackerman, J. T., & Eadie, J. M. (2003). Current versus future reproduction: an experimental test of parental investment decisions using nest desertion by mallards (Anas platyrhynchos). Behavioral Ecology and Sociobiology, 54(3), 264–273. https://doi.org/10.1007/s00265-003-0628-x.
Ariely, D., & Zakay, D. (2001). A timely account of the role of duration in decision making. Acta Psychologica, 108(2), 187–207. https://doi.org/10.1016/S0001-6918(01)00034-8.
Arkes, H. R., & Ayton, P. (1999). The sunk cost and Concorde effects: are humans less rational than lower animals? Psychological Bulletin, 125(5), 591–600. https://doi.org/10.1037/0033-2909.125.5.591.
Arkes, H. R., & Blumer, C. (1985). The psychology of sunk cost. Organizational Behavior and Human Decision Processes, 35(1), 124–140. https://doi.org/10.1016/0749-5978(85)90049-4.
Bavolar, J. (2013). Validation of the adult decision-making competence in Slovak students. Judgment and Decision making, 8(3), 386–392.
Benzur, H., & Breznitz, S. J. (1981). The effect of time pressure on risky choice behavior. Acta Psychologica, 47(2), 89–104. https://doi.org/10.1016/0001-6918(81)90001-9.
Bettman, J. R., Johnson, E. J., & Payne, J. W. (1990). A componential analysis of cognitive effort in choice. Organizational Behavior and Human Decision Processes, 45(1), 111–139. https://doi.org/10.1016/0749-5978(90)90007-V.
Boucher, D. H. (1977). On wasting parental investment. American Naturalist, 111, 786–788. https://doi.org/10.1086/283207.
Berndt, T. J. (2004). Children’s friendships: shifts over a half century in perspectives on their development and their effects. Merrill-Palmer Quarterly, 50, 206–223. https://doi.org/10.1353/mpq.2004.0014.
Brase, G. L. (2014). The nature of thinking, shallow and deep. Frontiers in Psychology, 5, 435. https://doi.org/10.3389/fpsyg.2014.00435.
Brown, B. B. (2004). Adolescent relationships with their peers. In R. M. Lerner & L. Steinberg (Eds.), Handbook of adolescent psychology (pp. 363–394). New York: Wiley.
Coleman, R. M., & Gross, M. R. (1991). Parental investment theory—the role of past investment. Trends in Ecology & Evolution, 6(12), 404–406. https://doi.org/10.1016/0169-5347(91)90163-R.
Coleman, R. M., Gross, M. R., & Sargent, R. C. (1985). Parental investment decision rules—a test in bluegill sunfish. Behavioral Ecology and Sociobiology, 18(1), 59–66. https://doi.org/10.1007/BF00299238.
Cosmides, L., & Tooby, J. (1994). Better than rational—evolutionary psychology and the invisible hand. American Economic Review, 84(2), 327–332.
Cooper-Martin, E. (1994). Measures of cognitive effort. Marketing Letters, 5(1), 43–56. https://doi.org/10.1007/BF00993957.
Curio, E. (1987). Animal decision-making and the concorde fallacy. Trends in Ecology & Evolution, 2(6), 148–152. https://doi.org/10.1016/0169-5347(87)90064-4.
Daly, M., & Wilson, M. (1988). Homicide. New Brunswick and London: Transaction Publishers.
Dawkins, R. & Brockmann, H.J. (1980). Do digger wasps commit the Concorde fallacy? Animal Behaviour, 28(AUG), 892-896. Doi: https://doi.org/10.1016/S0003-3472(80)80149-7.
Dawkins, R., & Carlisle, T. R. (1976). Parental investment, mate desertion and a fallacy. Nature, 262, 131–133. https://doi.org/10.1038/262131a0.
de Bruin, W. B., Parker, A. M., & Fischhoff, B. (2007). Individual differences in adult decision-making competence. Journal of Personality and Social Psychology, 92(5), 938–956. https://doi.org/10.1037/0022-3514.92.5.938.
Dunbar, R. I. M. (1998). The social brain hypothesis. Evolutionary Anthropology, 6(5), 178–190. https://doi.org/10.1002/(SICI)1520-6505(1998)6:5<178::AID-EVAN5>3.0.CO;2-8.
Dunbar, R. I. M., & Shultz, S. (2007). Evolution in the social brain. Science, 317, 1344–1347. https://doi.org/10.1126/science.1145463.
Einhorn, H. J., & Hogarth, R. M. (1981). Behavioral decision theory: processes of judgment and choice. Annual Review of Psychology, 32, 53–88. https://doi.org/10.1146/annurev.ps.32.020181.000413.
Friedman, D., Pommerenke, K., Lukose, R., Milam, G., & Huberman, B. A. (2007). Searching for the sunk cost fallacy. Experimental Economics, 10, 79–104. https://doi.org/10.1007/s10683-006-9134-0.
Furman, W., & Buhrmester, D. (1992). Age and sex differences in perceptions of networks of personal relationships. Child Development, 63, 103–115. https://doi.org/10.1111/j.1467-8624.1992.tb03599.x.
Garland, H., & Newport, S. (1991). Effects of absolute and relative sunk costs on the decision to persist with a course of action. Organizational Behavior and Human Decision Processes, 48, 55–69. https://doi.org/10.1016/0749-5978(91)90005-E.
Gigerenzer, G. (2004). The irrationality paradox. Behavioral and Brain Sciences, 27(3), 336–338. https://doi.org/10.1017/S0140525X04310083.
Gigerenzer, G. (2000). Adaptive thinking: rationality in the real world. Oxford: Oxford University Press.
Gigerenzer, G., & Gaissmaier, W. (2011). Heuristic decision making. Annual Review of Psychology, 62, 451–482. https://doi.org/10.1146/annurev-psych-120709-145346.
Gold, J. I., & Shalden, M. N. (2007). The neural basis of decision making. Annual Review of Neuroscience, 53, 535–574. https://doi.org/10.1146/annurev.neuro.29.051605.113038.
Gold, J. I., & Shadlen, M. N. (2002). Banburismus and the brain: decoding the relationship between sensory stimuli, decisions, and reward. Neuron, 36, 299–308. https://doi.org/10.1016/S0896-6273(02)00971-6.
Goldstein, D. G., & Gigerenzer, G. (2002). Models of ecological rationality: the recognition heuristic. Psychological Review, 109(1), 75–90. https://doi.org/10.1037/0033-295X.109.1.75.
Hamilton, W. D. (1964a). The genetical evolution of social behaviour, I. Journal of Theoretical Biology, 7, 1–16. https://doi.org/10.1016/0022-5193(64)90038-4.
Hamilton, W. D. (1964b). The genetical evolution of social behaviour, II. Journal of Theoretical Biology, 7, 17–52. https://doi.org/10.1016/0022-5193(64)90039-6.
Houston, A. I., McNamara, J. M., & Steer, M. D. (2007). Do we expect natural selection to produce rational behaviour? Philosophical Transactions of the Royal Society B-Biological Sciences., 362(1485), 1531–1543. https://doi.org/10.1098/rstb.2007.2051.
Janssen, M. A., & Scheffer, M. S. (2004). Overexploitation of renewable resources by ancient societies and the role of sunk-cost effects. Ecology and Society, 9(1), 6–20.
Lavery, R. J. (1995). Past reproductive effort affects parental behavior in a cichlid fish, cichlasoma-nigrofasciatum: a comparison of inexperienced and experienced breeders with normal and experimentally reduced broods. Behavioral Ecology and Sociobiology, 36(3), 193–199. https://doi.org/10.1007/BF00177796.
Ledbetter, A. M., Griffin, E., & Sparks, G. G. (2007). Forecasting “friends forever”: a longitudinal investigation of sustained closeness between best friends. Personal Relationships, 14, 343–350. https://doi.org/10.1111/j.1475-6811.2007.00158.x.
Macaskill, A. C., & Hackenberg, T. D. (2012). Providing a reinforcement history that reduces the sunk cost effect. Behavioural Processes, 89(3), 212–218. https://doi.org/10.1016/j.beproc.
Magalhães, P., & White, K. G. (2014). Persistence in extinction: the sunk time effect. Journal of Experimental Psychology: Animal Learning and Cognition, 40, 38–54. https://doi.org/10.1037/xan0000009.
Magalhães, P., & White, K. G. (2016). The sunk cost effect across species: a review of persistence in a course of action due to prior investment. Journal of the Experimental Analysis of Behavior, 105, 339–361. https://doi.org/10.1002/jeab.202.
Maynard Smith, J. (1977). Parental investment: a prospective analysis. Animal Behaviour, 25, 1–9. https://doi.org/10.1016/0003-3472(77)90062-8.
McCain, B. E. (1986). Continuing investment under conditions of failure: a laboratory study of the limits to escalation. Journal of Applied Psychology, 71, 280–284. https://doi.org/10.1037/0021-9010.71.2.280.
Meyer, D. J. (1993). First price auctions with entry: an experimental investigation. The Quarterly Review of Economics and Finance, 33(2), 107–122. https://doi.org/10.1016/1062-9769(93)90017-E.
Montgomerie, R. D., & Weatherhead, P. J. (1988). Risks and rewards of nest defense by parent birds. The Quarterly Review of Biology, 63, 167–187. https://doi.org/10.1086/415838.
Navarro, A. D., & Fantino, E. (2009). The sunk-time effect: an exploration. Journal of Behavioral Decision Making, 22(3), 252–270. https://doi.org/10.1002/bdm.624.
Navarro, A. D., & Fantino, E. (2007). The role of discriminative stimuli in the sunk cost effect. Revista mexicana de análisis de la conducta, 33(1), 19–29.
Navarro, A. D., & Fantino, E. (2005). The sunk cost effect in pigeons and humans. Journal of the Experimental Analysis of Behavior, 83, 1–13. https://doi.org/10.1901/jeab.2005.21-04.
Onnebrink, H., & Curio, E. (1991). Brood defense and age of young: a test of the vulnerability hypothesis. Behavioral Ecology and Sociobiology, 29(1), 61–68. https://doi.org/10.1007/BF00164296.
Pattison, K., Zentall, T. R., & Watanabe, S. (2012). Sunk cost: pigeons (Columba livia), too, show bias to complete a task rather than shift to another. Journal of Comparative Psychology, 126(1), 1–9. https://doi.org/10.1037/a0023826.
Phillips, O. R., Battalio, R. C., & Kogut, C. A. (1991). Sunk and opportunity costs in valuation and bidding. Southern Economic Journal, 58(1), 112–128. https://doi.org/10.2307/1060037.
Reddi, B. A. J., & Carpenter, R. H. S. (2000). The influence of urgency on decision time. Nature Neuroscience, 3(8), 827–831. https://doi.org/10.1038/77739.
Robertson, R. J., & Biermann, G. C. (1979). Parental investment strategies determined by expected benefits. Zeitschrift für Tierpsychologie, 50(2), 124–128. https://doi.org/10.1111/j.1439-0310.1979.tb01020.x.
Rytkonen, S., Orell, M., Koivula, K., & Soppela, M. (1995). Pseudo concorde fallacy in the willow tit. Animal Behaviour, 49(4), 1017–1028. https://doi.org/10.1006/anbe.1995.0131.
Sargent, R. C., & Gross, M. R. (1985). Parental investment decision rules and the concorde fallacy. Behavioral Ecology and Sociobiology, 17(1), 43–45. https://doi.org/10.1007/BF00299427.
Scharf, M., Shulman, S., & Avigad-Spitz, L. (2005). Sibling relationships in emerging adulthood and in adolescence. Journal of Adolescent Research, 20(1), 64–90. https://doi.org/10.1177/0743558404271133.
Schneider, W., Eschman, A., & Zuccolotto, A. (2012). E-prime user’s guide. Pittsburgh: Psychology Software Tools, Inc..
Simon, H. A. (2000). Bounded rationality in social science: today and tomorrow. Mind & Society, 1(1), 25–39. https://doi.org/10.1007/BF02512227.
Simon, H. A. (1982). Models of bounded rationality. Cambridge: MIT Press.
Simon, H. A. (1956). Rational choice and the structure of the environment. Psychological Review, 63, 129–138. https://doi.org/10.1037/h0042769.
Simon, H. A. (1955). A behavioral model of rational choice. Quarterly Journal of Economics, 69(1), 99–118. https://doi.org/10.2307/1884852.
Strough, J., Schlosnagle, L., Karns, T., Lemaster, P., & Pichayayothin, N. (2014). No time to waste: restricting life-span temporal horizons decreases the sunk-cost fallacy. Journal of Behavioral Decision Making, 27(1), 78–94. https://doi.org/10.1002/bdm.1781.
Tan, H., & Yates, J. F. (1993). Sunk cost effects: the influences of instruction and future return estimates. Organizational Behavior and Human Decision Processes, 63(3), 311–319. https://doi.org/10.1006/obhd.1995.1082.
Thaler, R. (1980). Toward a positive theory of consumer choice. Journal of Economic Behavior and Organization, 1, 39–60. https://doi.org/10.1016/0167-2681(80)90051-7.
Todd, P. M., & Gigerenzer, G. (2007). Environments that make us smart: ecological rationality. Current Directions in Psychological Science, 16(3), 167–171. https://doi.org/10.1111/j.1467-8721.2007.00497.x.
Tooby, J., & DeVore, I. (1987). The reconstruction of hominid behavioral evolution. Through strategic modeling. In W. G. Kinsey (Ed.), The evolution of human behavior: Primate models (pp. 183–237). New York: SUNY Press.
Trivers, R. L. (1974). Parent-offspring conflict. American Zoologist, 14, 249–264.
Trivers, R. L. (1971). The evolution of reciprocal altruism. QUARTERLY REVIEW OF BIOLOGY, 46, 35–57. https://doi.org/10.1086/406755.
Wang, X. T. (1996). Domain-specific rationality in human choices: violations of utility axioms and social contexts. Cognition, 60(1), 31–63. https://doi.org/10.1016/0010-0277(95)00700-8.
Weatherhead, P. J. (1979). Do savannah sparrows commit the concorde fallacy. Behavioral Ecology and Sociobiology, 5(4), 373–381. https://doi.org/10.1007/BF00292525.
Weatherhead, P. J. (1982). Risk-taking by red-winged blackbirds and the concorde fallacy. Zeitschrift Fur Tierpsychologie, 60(3), 199–208.
Whiten, A., & Byrne, R. W. (1988). The Machiavellian intelligence hypotheses. In R. Byrne & A. Whiten (Eds.), Machiavellian intelligence (pp. 1–9). Oxford: Oxford University Press.
Winkler, D. W. (1991). Parental investment decision rules in tree swallows: parental defense, abandonment, and the so-called Concorde fallacy. Behavioral Ecology, 2(2), 133–142. https://doi.org/10.1093/beheco/2.2.133.
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Conflict of Interest
The authors declare that they have no conflict of interest.
Rights and permissions
About this article
Cite this article
Hrgović, J., Hromatko, I. The Time and Social Context in Sunk-Cost Effect. Evolutionary Psychological Science 4, 258–267 (2018). https://doi.org/10.1007/s40806-017-0134-4
Published:
Issue Date:
DOI: https://doi.org/10.1007/s40806-017-0134-4