Sinking the Sunk Cost Fallacy

Sunk costs can be thought of as stuff you've already paid for and cannot be sold or traded. Many investments, whether of time or money, are sunk costs. Rationally, we shouldn't let sunk costs affect our decision making. If A is strictly better than B, we should choose A regardless of how much unrecoverable cost we have incurred on B. The sunk cost fallacy refers to the human tendency to continue poor investments, that is, to choose B instead. A study (press release) by Daniel C. Molden and Chin Ming Hu shows that the sunk cost fallacy can be reduced by priming:

Volunteers were first asked to write generally about either their personal duties and obligations or their personal hopes and aspirations. Then they were asked to imagine that they were the president of an aviation company who had committed $10 million to building a special kind of airplane. But with $9 million already spent and the project nearly done, another company had announced they had made a better, cheaper plane. They were asked whether they would spend the last $1 million or cancel the project.

People who had thought about their hopes and aspirations were more likely to say they would abandon the project. On the other hand, people who had written about their duties and obligations felt it was their responsibility to finish the project—thus throwing good money after bad. Molden suggests that this is because people who focus on their own hopes are thinking positively about opportunities for growth, and are therefore more likely to appreciate what else might be accomplished with the remaining $1 million, whereas people who focus on duties and obligations are feeling anxious and thinking about how abandoning the project would be accepting complete failure.

My interpretation: putting volunteers into far mode (hopes and aspirations) mitigated the sunk cost fallacy while near mode (duties and obligations) exacerbated it. I doubt these results can be generalized, however. Imagine Alice has a gym membership that she never uses. I don't see how priming Alice with hopes and aspirations would make her more likely to drop the unproductive membership.

Which is not to say that more creative solutions aren't possible. (HT: Tyler Cowen)