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

Theodore P. Pavlic, Kevin M. Passino

Research output: Contribution to journalArticle

3 Scopus citations

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 1 2011
Externally publishedYes

Keywords

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

ASJC Scopus subject areas

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

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