Sunk cost fallacy in driving the world’s costliest cars

• Main Authors: Ho, Teck-Hua, Png, I. P. L., Reza, Sadat
• Other Authors: Nanyang Business School
• Format: Article
• Language: English
• Published: 2019
• Subjects: Mental Accounting; Sunk Costs; DRNTU::Business::Accounting::Cost
• Online Access: https://hdl.handle.net/10356/105825; http://hdl.handle.net/10220/48747
• Institution: Nanyang Technological University

We develop a behavioral model of durable good usage with mental accounting for sunk costs. It predicts higher-than-rational usage that attenuates at a rate that increases with sunk costs. Singapore government policy varied the sunk cost of buying a new car. Using Singapore data, we estimate the elas...