What is it about?

The sunk cost effect is the scenario when individuals are willing to continue to invest capital in a failing project. Cognitive dissonance has a moderating effect, and only when the level of cognitive dissonance is high does the sunk cost have significantly positive impacts on willingness to continue on with an unfavorable investment.

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Why is it important?

This study offers psychological mechanisms to explain the sunk cost effect based on the theory of cognitive dissonance, and it also provides some recommendations for corporate management.

Perspectives

This study expounds the potential psychological mechanism of cognitive dissonance on the sunk cost effect and has made a contribution to extending the theoretical framework in this research field. Researchers can extend this study further to consider how to reduce the sunk cost effect. For example, managerial incentives may reduce managers’ attempts to invest in a failing project. Besides, the organization identity and emphasis on achievement of budgetary goals are all possible factors that can affect the decision of whether to continue on with an unfavorable investment.

Shao-Hsi Chung
Meiho University

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This page is a summary of: How does cognitive dissonance influence the sunk cost effect? [Corrgendum], Psychology Research and Behavior Management, April 2018, Dove Medical Press, DOI: 10.2147/prbm.s169092.
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