The Sunk-cost Effect as an Optimal Rate-maximizing Behavior

Theodore Pavlic, Kevin M. Passino

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

Optimal foraging theory has been criticized for underestimating patch exploitation time. However, proper modeling of costs not only answers these criticisms, but it also explains apparently irrational behaviors like the sunk-cost effect. When a forager is sure to experience high initial costs repeatedly, the forager should devote more time to exploitation than searching in order to minimize the accumulation of said costs. Thus, increased recognition or reconnaissance costs lead to increased exploitation times in order to reduce the frequency of future costs, and this result can be used to explain paradoxical human preference for higher costs. In fact, this result also provides an explanation for how continuing a very costly task indefinitely provides the optimal long-term rate of gain; the entry cost of each new task is so great that the forager avoids ever returning to search. In general, apparently irrational decisions may be optimal when considering the lifetime of a forager within a larger system.

Original languageEnglish (US)
Pages (from-to)53-66
Number of pages14
JournalActa Biotheoretica
Volume59
Issue number1
DOIs
StatePublished - Mar 2011
Externally publishedYes

Fingerprint

Optimal Rates
foraging
Costs and Cost Analysis
Costs
cost
Exploitation
rate
effect
Foraging
Patch
Lifetime
Minimise
Foragers
Modeling

Keywords

  • Concorde fallacy
  • Escalation error
  • Optimal foraging theory
  • Patch residence time
  • Rationality
  • Solitary animal behavior

ASJC Scopus subject areas

  • Agricultural and Biological Sciences(all)
  • Philosophy
  • Biochemistry, Genetics and Molecular Biology(all)
  • Environmental Science(all)
  • Applied Mathematics

Cite this

The Sunk-cost Effect as an Optimal Rate-maximizing Behavior. / Pavlic, Theodore; Passino, Kevin M.

In: Acta Biotheoretica, Vol. 59, No. 1, 03.2011, p. 53-66.

Research output: Contribution to journalArticle

Pavlic, Theodore ; Passino, Kevin M. / The Sunk-cost Effect as an Optimal Rate-maximizing Behavior. In: Acta Biotheoretica. 2011 ; Vol. 59, No. 1. pp. 53-66.
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