Irrational Perseverant or Unrecoverable Optimist? A Normative Reading of Sunk Cost Affected Behaviors

The purpose of this study was to analyze the relationship between the sunk cost effect and ambiguity in investment situations. Starting from the sensemaking approach and the decision dilemma theory, our hypothesis is that a sunk cost affected decision can be “constructively" rational in ambiguous environments in the sense that decision makers have the opportunity, through actions, to enact an environment that allows an effective utilization of their sunk costs. We called this attitude “constructive rationality”. We conducted an experiment (N=353) in which we manipulated the degree of ambiguity of the typical investment scenario proposed in the seminal work of Arkes and Blumer (n. 3A), analyzed the willingness to continue in each scenario, and the driving forces behind positive responses. Our results demonstrate that ambiguity favors further commitment of resources allowing a constructive interpretation of the future. Implications of these results and directions for future research are discussed.