Behaviour Change

PROPAGANDA FOR CHANGE is a project created by the students of Behaviour Change (ps359) and Professor Thomas Hills at the Psychology Department of the University of Warwick. This work was supported by funding from Warwick's Institute for Advanced Teaching and Learning.

Thursday, January 22, 2015

In for a penny, in for a pound: Sunk-Cost at Warwick SU


I and a friend are playing pool at the students’ union. The score is five frames to three and I’m losing. Pool costs £1 to play, we have played eight times and each paid half - so I have already invested £4. Just as I am ready to accept defeat, my friend says “If you give me £3 for three more frames, see if you can come back and win, but if I win one more frame I’ll keep the money… and the glory”.


At face value, it’s a bad investment. We’re a pretty equal level of pool ability, so statistically I am likely to give 3 pounds away to watch myself lose the session. In perspective, that £3 could get me a Tesco’s meal deal, or even better – a pint. The reason my friend was able to persuade me to give him the money was acting on the sunk-cost effect. The sunk-cost effect is an example of how commitment (an investment of time, money or effort) can lead to a further commitment – even if the costs of the further commitment outweigh the benefit. 


Arkes and Blumer (1985) demonstrate how robust the sunk-cost fallacy is over a series of ten experiments. In the most famous example (experiment 3) participants were asked to imagine that they are the chief executive of an aircraft development company, who wish to develop a new aircraft undetectable by radar. In two conditions, participants were asked whether or not they would invest one million dollars into the project. 

In one group participants were told that “another firm has just begun marketing a plane that cannot be detected by radar. Also, it is apparent that their plane is much faster and far more economical than the plane your company could build”. The evidence suggests that it is a bad investment, because the other firm has already designed a better product. As expected, only 16.7% of participants would choose to invest. However, in the other condition participants were also told that the project is 90% complete and the company has already invested ten million dollars, with the remaining million necessary to finish the project. In this condition over 85% participants would choose to commit the remaining funds. This demonstrates that we are prone to making bad decisions if we have already made a commitment, rather than making bad decisions from the start.


These results are depicted in figure 1. 



Although my investment into pool is less important than pumping millions into an airline, the principle still applies. If I was asked to give my friend £3 from the start of the session, with the chance of losing it all after £1 worth of play, I would have said no. But my prior investment allowed him to persuade me to carry on.


Lo and behold: 5 minutes after I succumbed to the proposition, he pots the black to make it 6-3 and walks away with my money. Next time I won’t make the same mistake.

References
Arkes, H. R., & Blumer, C. (1985). The psychology of sunk cost. Organizational behavior and human decision processes, 35, 124-140.

2 comments:

  1. Interesting reading son. So that's why you asked if we could go for a game of pool next time I'm up there ;o)

    ReplyDelete
  2. when your dad comments on the persuasion and influence blog...

    ReplyDelete

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