Sunk cost in investment decisions

Marcello Negrini*, Arno Riedl, Matthias Wibral

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review


We experimentally investigate the effect of sunk cost in a two-stage investment continuation task. After an initial investment, participants have to decide whether or not to continue the project with an additional investment. We do not find a standard sunk cost bias, but observe a robust reverse sunk cost effect: the larger the initial investment, the lower the likelihood to continue investing. This holds despite the fact that we replicate the standard sunk cost bias in hypothetical scenarios. We argue that both, risk aversion without asset integration and loss aversion can account for the reverse sunk cost effect.
Original languageEnglish
Pages (from-to)1105-1135
Number of pages31
JournalJournal of Economic Behavior & Organization
Publication statusPublished - Aug 2022

JEL classifications

  • c91 - Design of Experiments: Laboratory, Individual
  • d01 - Microeconomic Behavior: Underlying Principles
  • d90 - Intertemporal Choice and Growth: General
  • d91 - "Intertemporal Consumer Choice; Life Cycle Models and Saving"


  • sunk cost bias
  • incentivized experiment
  • hypothetical scenario
  • cognitive dissonance
  • loss aversion
  • waste aversion


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