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Group Processes & Intergroup Relations, Vol. 1, No. 2, 175-189 (1998)
DOI: 10.1177/1368430298012005

Investment Decisions by Individuals and Groups in `Sunk Cost' Situations: The Potential Impact of Shared Representations

Christine M. Smith

Department of Psychology, Grand Valley State University, SmithC{at}gvsu.edu

R. Scott Tindale

Department of Psychology, Loyola University Chicago

Linda Steiner

Department of Psychology, Loyola University Chicago

Past research has shown that individuals prefer to continue investing resources into a failing endeavor once a considerable investment has been made, even when abandoning the project would be more rational economically. This phenomenon has been labeled the sunk cost effect (Arkes & Blumer, 1985). Since investment decisions are often made by groups, we compared individual and group propensities for falling prey to the sunk cost effect. We also varied whether or not individuals and groups needed to justify their investment decision to a superior. Both individuals and groups showed the sunk cost effect. Group process analyses showed that error-prone majorities were more powerful than more rational minorities. In addition, group decisions seemed to be a function of two competing task representations - one favoring the sunk cost interpretation and the other favoring economic rationality.

Key Words: group decision making • shared representations • sunk cost


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