The mental accounting of sunk time costs: why time is not like money
Article first published online: 29 JUN 2001
Copyright © 2001 John Wiley & Sons, Ltd.
Journal of Behavioral Decision Making
Volume 14, Issue 3, pages 169–185, July 2001
How to Cite
Soman, D. (2001), The mental accounting of sunk time costs: why time is not like money. J. Behav. Decis. Making, 14: 169–185. doi: 10.1002/bdm.370
- Issue published online: 29 JUN 2001
- Article first published online: 29 JUN 2001
- sunk-cost effect;
- mental accounting;
- past investments
The sunk-cost effect, an irrational attention to non-recoverable past costs while making current decisions, has been documented widely in the domain of monetary costs. In this paper, I study the effect of past time investments on current decisions. In three experiments using choice situations, I demonstrate that the sunk-cost effect is not observed for past investments of time, but the effect reappears when the investments are expressed as monetary quantities. I further propose that this ‘pseudo-rationality’ is due to the fact that individuals lack the ability to account for time in the same way as they account for money. In two additional experiments, I facilitate the accounting of time and show that the irrational sunk-cost effect reappears. In a final experiment, I test my propositions in a setting where subjects make real investments of time and subsequently make real choices. Copyright © 2001 John Wiley & Sons, Ltd.