A Model of Sunk Cost Research has shown that individuals who invest money in a project, receive negative feedback regarding that decision, and then face a decision as to whether to invest still more money are more likely to do so than people who did not make the initial investment. Individuals who throw good money after bad in this manner are said to succumb to the `sunk cost` fallacy. While there is no doubt that people do sometimes honor sunk costs, experiments conducted to date fail to make clear why such behavior occurs. In this proposal the PI presents a general framework for modeling the thought process involved in investment-reinvestment decisions. He then proposes a set of eight experiments to identify which of the potential set of relevant factors actually produce sunk cost behavior.
