Replication data for: Mnemonomics: The Sunk Cost Fallacy as a Memory Kludge

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AEJMicro_2010-0090_data-2			10/12/2019 11:19:PM
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Project Citation:

Baliga, Sandeep, and Ely, Jeffrey C. Replication data for: Mnemonomics: The Sunk Cost Fallacy as a Memory Kludge. Nashville, TN: American Economic Association [publisher], 2011. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-12. https://doi.org/10.3886/E114388V1

Project Description

Summary: We offer a theory of the sunk cost fallacy as an optimal response to limited memory. As new information arrives, a decision-maker may not remember all the reasons he began a project. The sunk cost gives additional information about future profits and informs subsequent decisions. The Concorde effect makes the investor more eager to complete projects when sunk costs are high and the pro-rata effect makes the investor less eager. In a controlled experiment we had subjects play a simple version of the model. In a baseline treatment subjects exhibit the pro-rata bias. When we induce memory constraints the effect reverses and the subjects exhibit the Concorde bias. (JEL D24, D83, G31)

Scope of Project

JEL Classification:
      D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
      D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
      G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity

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Published Versions

V1 [2019-10-12]

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DDI 2.5

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