Sunk-Cost Bias: How Far Does it Go in Decision Making?

The sunk cost fallacy occurs when individuals willingly choose to engage in a task even when they know it is fruitless, solely because of the unrecoverable invested resources they have already committed. When making decisions, especially when they are highly complex, requires great consideration for prospects. Ideally, we should ignore the past and come to a decision purely based on the future, yet we continue to engage in this cognitive bias. Knowing this, research on this phenomenon is pivotal to unraveling the neuroanatomical and behavioral implications of engaging in the sunk-cost bias, as well as the extent that it impacts all facets of decision making.

In the article, Sensitivity to ‘sunk costs’ in mice, rats, and humans,” by Dr. Sweis et al., researchers were attempting to discern whether sensitivities to sunk costs affect both human and nonhuman animals in their future decisions. In this specific study, the sunk cost was represented temporally which essentially equates to the amount of time invested in a decision. To test whether sunk costs affected decision making across species, Sweis et al., created a naturalistic laboratory foraging task paradigm that required subjects to utilize time from a limited time budget to obtain rewards. Economically, time was the currency being measured in this experiment, and the divvying up of time was representative of the economic preferences that each species held.

In this paradigm, areas of the task were broken up into three separate zones. The first zone was also known as the “offer zone”. Here, participants were presented with a potential reward that came in the form of a tasty food pellet for the nonhuman animals or an enjoyable video for the human participants. Time was not limited when the subjects were deciding on whether this reward was worth pursuing. When a reward was deemed satisfactory enough to pursue, participants entered a “wait zone” which required a certain amount of time to have passed to receive the reward. Both the nonhuman animals and humans were allowed to leave the wait zone at any time to begin searching for a novel reward at a subsequent offer zone. The third and final zone was a post reward consumption hedonic evaluation where overall satisfaction was gauged. With this experimental paradigm, researchers analyzed the quit decisions that presented in the wait zone as this represented the abandonment of reward-seeking behaviors although prior investment while on a limited time budget occurred; this represented the sunk cost.

Ultimately, the results had suggested that all three groups of animals allowed sunk costs to influence their decision-making, however, this was only present in the wait zone. These sunk cost effects grew in strength proportional to prior time investment. With these results in mind, Sweis et al., aimed to understand why this suboptimal cognitive phenomenon has persisted across species and evolution? Sweis et al., had posited that the decision-making process is split up into distinct “zones” and that each zone has its own distinct neural circuit and deliberation algorithms.

The research conducted by Sweis et al., and other labs had primarily focused on the sunk-cost bias affecting future consequences. In the article, “Wronging past rights: In The sunk cost bias distorts moral judgment,” by Meyers et al., researchers tried to pinpoint whether the sunk cost effect applies to moral judgments in humans. Specifically, they aimed to identify if past sunk costs can affect one’s judgment on whether an action is moral and permissible. To determine if sunk costs have an impact on moral judgments, Meyers et al., created two experimental paradigms.

The first experiment was broken up into two distinct portions: 1A and 1B. In this experiment, participants were assigned to read a short story and were later instructed to give a rating in terms of their agreement with the proposed plan of action. In experiment 1A, the participants were tasked to develop a cure for a disease and in experiment 1B they were tasked with finding a way to relieve traffic. They were then informed that recent information had come out that suggested that their current goal was in vain (another company produced a better and more efficient drug, or another governmental agency created a better plan to fix traffic). After this, the participants had to decide whether they would pursue the completion of the goal even though it would require expending more resources.

The short stories were manipulated in two different ways. In one instance, completion of the goal required a moral violation such as the killing of lab monkeys during drug testing or the bulldozing of civilian houses, and in the other case, there was no moral violation (killing pine trees for the cure or bulldozing government-owned land). The second manipulation tested decisions based on whether there have already been sunk costs (a lot of monkeys or pine trees already killed; a lot of houses or government land bulldozed already). The results had suggested that participants are more willing to engage in futile activities when sunk costs have occurred. Moreover, they had found that sunk costs had a significant impact on decisions to act when faced with an immoral dilemma.

The second experiment conducted by Meyers et al., aimed to determine if sunk can make an immoral action seem less immoral. The procedure was the same in the first experiments, however, the short stories were the immoral opposites. The results of this experiment had suggested that when faced with sunk costs, participants were more often than not, choosing to continue engaging in an immoral action compared to when there were no sunk costs. Additionally, they had found that the participants judged these immoral tasks as acceptable when sunk costs were already accrued, even though the benefit was removed.

The findings by Sweis et al., and Meyers et al., go hand in hand with each other. On one end of the spectrum, some findings suggest that different algorithms and distinct processes are utilized to engage in future decision-making. Clearly, there is a strong anatomical and cognitive aspect towards the sunk-cost bias, as evidence by Sweis et al., however, the findings by Meyers et al., suggests that this extends to moral judgment and executive functions. Sweis et al., had shown that the higher the initial investment, the sensitivity to sunk costs increases. This was shown when participants were faced with immoral decisions in the Meyers et al., study, where sunk costs had a greater effect. One can conclude that there was both an economic and moral past investment uniting the findings of the two studies. Given this, there still needs to be research conducted that looks at the neural correlates associated with moral judgments. Perhaps there exists additional distinct neural systems and algorithms for moral judgments that can be incorporated with decisions based on economic factors when faced with a highly complex situation.

References

Meyers, E. A., Białek, M., Fugelsang, J. A., Koehler, D. J., & Friedman, O. (2019). Wronging past rights: The sunk cost bias distorts moral judgment. Judgment and Decision Making, 14(6), 721-727. 

Sweis, B. M., Abram, S. V., Schmidt, B. J., Seeland, K. D., MacDonald, A. W., 3rd, Thomas, M. J., & Redish, A. D. (2018). Sensitivity to "sunk costs" in mice, rats, and humans. Science (New York, N.Y.), 361(6398), 178–181. https://doi.org/10.1126/science.aar8644