Accession Number : ADA138237

Title :   The Impact of Sunk Outcomes on Risky Choice Behavior.

Descriptive Note : Technical rept.,

Corporate Author : DUKE UNIV DURHAM NC GRADUATE SCHOOL OF BUSINESS ADMINISTRATION

Personal Author(s) : Laughhunn,D. ; Payne,J. W.

Report Date : JAN 1984

Pagination or Media Count : 58

Abstract : This paper examines the impact of historical or sunk outcomes on the framing of risky choice problems. Two conflicting views exist in the literature about framing such sunk outcomes: framing based on the minimal account (where sunk outcomes are ignored) and framing based on the psychological account (where sunk outcomes are somewho included in the decision process. Several studies are reviewed in order to identify the rationale for the two conflicting views of framing and to isolate some of the factors that are of potential importance in determing the appropriate decision frame of sunk outcomes problems. Results of an exploratory experiment on framing of risky choice problems with 60 professional managers are also reported. In general, these results suggest a rather extensive use of the psychological account for both personal and corporate decisions, for continue/discontinue problems and asset disposal problems, and for sunk benefits as well as sunk costs. Experimental results also indicate that predicting the impact on risky choices from use of the psychological account is not a simple issue. Prospect theory, as a basis of prediction, was only partially successful and, in some areas, predicted poorly. The concept of affect (or mood state) was found to add to the ability to explain results in some cases. (Author)

Descriptors :   *Decision making, *Problem solving, *Management, Risk, Selection, Perception(Psychology), Judgement(Psychology), Reasoning, Mental ability, Research management

Subject Categories : Psychology

Distribution Statement : APPROVED FOR PUBLIC RELEASE