President Bush is quoted in 2005 as saying “we owe them something…We will finish the task that they gave their lives for,” about the soldiers who have died since the 9/11 terrorist attack on the World Trade Center, exemplifying a mode of thinking that appeals to everyone in some way. Most people know this notion as an expenditure made in the past that cannot be modified, or the sunk-cost fallacy.
A recent study in the July issue of Psychological Science tested the relationship between older and younger adults through an individuals’ commitment relating to the “sunk-cost fallacy,” in matters of money.
This fallacy, or more specifically, the human tendency to judge options according to the size of previous investments rather than the size of the expected return, has recently been tested by psychologists JoNell Strough, Clare Mehta, Joseph McFall and Kelly Schuller from West Virginia University, using college students and senior citizens.
In each scenario involving the different generations, some of the testers were presented with the notion that they had paid $10.95 for a movie while others were made to believe they were watching a free movie. In the event of both groups viewing the same un-stimulating movie they were given five options concerning their projected time commitment: Stop watching entirely, watch for ten more minutes, watch for twenty more minutes, watch for thirty more minutes, or watch until the end.
In the pay scenario, which told testers, “you paid $10.95 to see a movie on pay T.V. After five minutes, you are bored and the movie seems pretty bad,” the younger adults proved to watch the movie for a longer period than senior citizens involved in the same situation.
Using information found Strough explained that younger people have a more negative outlook on situations involving the sunk-cost fallacy. “They weigh negative information, such as the lost investment, more heavily than positive information and so they try to ‘recover’ the lost investment by investing more time,” he said.
To Strough, this shows proof that people from older generations have a more positive, balanced outlook on pre-invested money.