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EMAC 2019 Annual Conference

Improving consumer decisions by reducing the sense of connectedness with the past self: Low past-self continuity can attenuate sunk cost bias

Published: May 28, 2019


Nazli Gurdamar Okutur, London Business School; Anja Schanbacher, Duke University; David Faro, London Business School


sunk cost bias; self-continuity; consumer decision-making


Sunk cost bias-the tendency to continue an inferior course of action because one has made an irrecoverable investment in it in the past-can lead consumers to make decisions that are suboptimal for their welfare. For example, consumers may continue spending money on a hobby that they do not enjoy merely because they have bought expensive equipment. We propose that the sunk cost fallacy can be mitigated by interventions that reduce the sense of past-self continuity, or the sense of connectedness to the past self who incurred the initial cost. This is because consumers with low (compared to high) self-continuity anticipate less negative feelings associated with abandoning the course of action after incurring sunk costs. Further in line with our theoretical account, the effect of low self-continuity on the likelihood of switching one’s course of action is stronger when sunk cost is high and is weaker when sunk cost is low.