Sunk costs under stress: Acute stress reduces the impact of past expenses on risky decisions

Rational choice should be guided solely by the prospects of available options. However, our decisions are often influenced by irrecoverable past costs, even when the current course of action turns out to be unfavorable, reflecting a cognitive bias known as the "sunk-cost effect". In everyday life, many decisions are made under stress or elicit stress themselves. Whether and how stress impacts the sunk-cost effect, however, is not known. Based on evidence suggesting that the sunk-cost effect critically depends on the dorsolateral prefrontal cortex, which in turn is highly sensitive to stress, we hypothesized that stress may reduce the influence of past expenses on current decisions. Participants underwent a psychosocial stress manipulation or control procedure, before we assessed their sunk-cost tendency in a monetary investment task. Overall, participants showed a pronounced sunk-cost effect, particularly for options with low expected value. Acute stress reduced this tendency to invest in risky options with low probability of success following high prior investments. Moreover, the strength of this reduction of the sunk-cost effect was predicted by individual cortisol reactivity. These findings show that acute stress may reduce the impact of past expenses on current choice and that this effect may be mediated by glucocorticoid action.

Increasing uptake of National Health Service Health Checks in primary care: a pragmatic randomized controlled trial of enhanced invitation letters in Northamptonshire, England

BACKGROUND

Uptake of NHS Health Checks (NHSHCs) is sub-optimal. This study aimed to increase their uptake using behaviourally informed invitation letters.

METHOD

Patients registered with 6 general practices in Northamptonshire, England who were eligible for an NHSHC between 10 February 2014 and 31 January 2015 were randomized monthly, using a random number generator, to three trial arms: control (standard invitation), sunk costs (resources already allocated) and counterargument (against common barriers to attendance). The outcome measure was uptake of NHSHC by 12 weeks after 31 January.

RESULTS

In total, 6331 patients were randomized. After exclusions, due to ineligibility for the NHSHC, data were analysed for N = 6313 patients: N = 2123 control; N = 2085 counterargument; N = 2105 sunk costs. Overall, 2364 (37.45%) patients attended an NHSHC. Both intervention letters increased uptake compared to control, by 5.46% using counterargument (adjusted odds ratio (AOR) 1.32, CI 1.162-1.51, p < 0.001) and 4.33% using sunk costs (AOR 1.246, CI 1.10-1.42, p < 0.001), with no significant difference between the two.

CONCLUSION

Behaviourally informed invitation letters, containing sunk costs or counterargument messages, can improve the uptake of NHSHCs. The trial was registered with the International Standard Randomised Controlled Trial Registration Number Scheme (ISRCTN57110614).

Perceptual decision confidence is sensitive to forgone physical effort expenditure

Contemporary theoretical accounts of metacognition propose that action-related information is used in the computation of perceptual decision confidence. We investigated whether the amount of expended physical effort, or the 'motoric sunk cost' of a decision, influences perceptual decision confidence judgements in humans. In particular, we examined whether people feel more confident in decisions which required more effort to report. Forty-two participants performed a luminance discrimination task that involved identifying which of two flickering grayscale squares was brightest. Participants reported their choice by squeezing hand-held dynamometers. Across trials, the effort required to report a decision was varied across three levels (low, medium, high). Critically, participants were only aware of the required effort level on each trial once they had initiated their motor response, meaning that the varying effort requirements could not influence their initial decisions. Following each decision, participants rated their confidence in their choice. We found that participants were more confident in decisions that required greater effort to report. This suggests that humans are sensitive to motoric sunk costs and supports contemporary models of metacognition in which actions inform the computation of decision confidence.

Mindfulness and decision making: sunk costs or escalation of commitment?

Mindfulness is related to a number of positive health outcomes, such as decreased stress, anxiety and improved physical functioning. Recent studies have found that mindfulness is related to a range of cognitive outcomes, including better decision making. In one example, higher trait mindfulness and brief mindfulness inductions are associated with resistance to the influence of sunk costs, where mindful individuals were more willing to discontinue a costly, but disadvantageous, course of action. However, some previous studies examining mindfulness and sunk costs have methodological limitations which make it difficult to determine if mindfulness is specifically related to sensitivity to the sunk cost bias, or rather than to a general willingness to continue an unprofitable course of action (independent of the level of prior investment). The present study extends previous work by replicating the finding that trait mindfulness is positively related to resistance to the effects of sunk costs and also demonstrates that mindfulness is related to reduced escalation of commitment, an individual's willingness to continue their commitment to an unprofitable course of action through the further investment of resources or time. Overall, trait mindfulness was most consistently related to reduced escalation of commitment, whereas the relationship between trait mindfulness and resistance to the effects of sunk costs was less consistently observed.

Money for nothing: How firms have financed R&D-projects since the Industrial Revolution

We investigate the long-run historical pattern of R&D-outlays by reviewing aggregate growth rates and historical cases of particular R&D projects, following the historical-institutional approach of Chandler (1962), North (1981) and Williamson (1985). We find that even the earliest R&D-projects used non-insignificant cash outlays and that until the 1970s aggregate R&D outlays grew far faster than GDP, despite five well-known challenges that implied that R&D could only be financed with cash, for which no perfect market existed: the presence of sunk costs, real uncertainty, long time lags, adverse selection, and moral hazard. We then review a wide variety of organisational forms and institutional instruments that firms historically have used to overcome these financing obstacles, and without which the enormous growth of R&D outlays since the nineteenth century would not have been possible.