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

Resource Type
  • Baliga, Sandeep
  • Ely, Jeffrey C.
Publication Date
  • Abstract

    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)
  • Is supplement to
    DOI: 10.1257/mic.3.4.35 (Text)
  • Baliga, Sandeep, and Jeffrey C Ely. “Mnemonomics: The Sunk Cost Fallacy as a Memory Kludge.” American Economic Journal: Microeconomics 3, no. 4 (November 2011): 35–67.
    • ID: 10.1257/mic.3.4.35 (DOI)

Update Metadata: 2020-05-18 | Issue Number: 2 | Registration Date: 2019-10-13

Baliga, Sandeep; Ely, Jeffrey C. (2011): Replication data for: Mnemonomics: The Sunk Cost Fallacy as a Memory Kludge. Version: V0. ICPSR - Interuniversity Consortium for Political and Social Research. Dataset.