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To the Depths of the Sunk Cost : Experiments Revisiting the Elusive Effect

Author

Listed:
  • Beknazar-Yuzbashev, George

    (Columbia University)

  • Ichiba, Sota

    (Tilburg University)

  • Stalinski, Mateusz

    (University of Warwick & CAGE)

Abstract

Despite being often discussed both in practice and academic circles, the sunk cost effect remains empirically elusive. Our model based on reference point dependence suggests that the traditional way of testing it—by assigning discounts—may not produce the desired effect. Motivated by this, we evaluate it across the gain-loss divide in two preregistered experiments. In an online study, we randomize the price (low, medium, or high) of a ticket to enter a real-effort task and observe its effect on play time. Despite varying the sunk cost by $2 for a 14-minute task and the sample size of N=1,806, we detect only a small effect (0.09 SD or 1.1 minutes). We further explore the economic applications of the effect in a field experiment on YouTube with N=11,328 videos in which we randomize whether the time until a pre-video ad becomes skippable is shortened (0 s), default (5 s), or extended (10 s). The intervention has an overall insignificant effect on video engagement. This is driven by a sizable negative effect on the extensive margin, a channel which is not present in the online study. Specifically, more users leave before the video starts in the extended treatment (5.2 pp. or 28% more relative to the shortened treatment). Taking the results of both studies together, we offer a cautionary tale that applying even the most intuitive behavioral effects in policy settings can prove challenging. JEL Codes: C91 ; C93 ; D04 ; D11 ; D12 ; D90 ; M31 ; M37

Suggested Citation

  • Beknazar-Yuzbashev, George & Ichiba, Sota & Stalinski, Mateusz, 2025. "To the Depths of the Sunk Cost : Experiments Revisiting the Elusive Effect," The Warwick Economics Research Paper Series (TWERPS) 1544, University of Warwick, Department of Economics.
  • Handle: RePEc:wrk:warwec:1544
    as

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    File URL: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/2025/twerp_1544-_stalinski.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    sunk cost ; sunk cost fallacy ; loss aversion ; mental accounting ; regret ; digital platforms;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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