One of the many ways in which 'real world' decision-makers fall short of the purely rational ideal is that decision-makers in the real world are subject to the sunk cost fallacy. Sunk costs are costs that have already occurred and that cannot be recovered. In his book Misbehaving: The Making of Behavioral Economics (which I reviewed here), the 2017 Nobel Prize winner Richard Thaler argues that the sunk cost fallacy arises because of a combination of loss aversion and mental accounting.
In general, people are loss averse because we value losses more than we value equivalent gains. Gaining $10 makes us happier, but losing $10 makes us unhappier to a greater extent than gaining $10 makes us happier. So, we generally try to avoid losses.
Mental accounting suggests that we keep 'mental accounts' associated with different activities. We put all of the costs and benefits associated with the activity into that mental account, and when we stop that activity, we close the mental account associated with it. At that point, if the mental account has more costs in it than benefits, it counts as a loss. And because we are loss averse, we try to avoid closing the account.
Part of the issue with susceptibility to the sunk cost fallacy is that real world decision-makers are thinking emotionally. If they were dispassionate logical-thinking robots, they wouldn't take sunk costs into account in their decisions. But although decision-makers are not all equally susceptible to the sunk cost fallacy, the costs in terms of sub-optimal decision-making may be substantial. So, studies of the sunk cost fallacy in different population groups are important.
One interesting new study by Nicky Rogge (KU Leuven), published in the Journal of Economic Psychology (sorry I don't see an ungated version online), looks at the difference between people with autism spectrum disorder (ASD) and neurotypical people. Rogge first reminds us of 'Dual Process Theory', which posits that:
...reasoning and decision making can be described as a function of two processing or reasoning systems: the intuitive reasoning system and the deliberative analytic-logical reasoning system. The intuitive reasoning system involves an implicit, unconscious reasoning process that is independent of cognitive ability and working memory, and that is rapid and automatic. The deliberative analytic-logical reasoning system involves an explicit (controlled), conscious reasoning process that depends strongly on cognitive ability and working memory, and is slower and more effortful.
Some of you may recognise this as the 'System 1' and 'System 2' thinking processes that 2002 Nobel Prize winner Daniel Kahneman outlined in his book Thinking, Fast and Slow. Rogge then outlines some of the literature on thinking processes among people with ASD, and notes that:
Brosnan et al. (2016, 2017) and Lewton et al. (2019) argued that the pattern of reasoning and decision-making styles adopted by individuals with ASD is more biased away from intuitive reasoning and more towards deliberative reasoning styles, as compared to what is observed in neurotypicals.
That suggests that, to the extent that the sunk cost fallacy arises from decision processes occurring within the intuitive 'System 1', that people with ASD may be less susceptible to the sunk cost fallacy (as well as potentially other heuristics and biases that together define 'quasi-rational' behaviour).
Rogge then tests a number of hypotheses related to this, using data collected from an online survey of 332 people from Belgium, 187 of whom self-reported as having been diagnosed with ASD, while 34 reported a strong suspicion of ASD but no diagnosis, and 111 'neurotypicals', who reported no ASD. Rogge doesn't just take the research participants' word for it - he administers to AQ-Short test to derive a quantitative measure of where each research participant (self-reported ASD or neurotypical) fits on a scale (the AQ-10 scale). The survey asked participants about six problems, where:
Each of the six sunk-cost decision tasks presents a hypothetical decision scenario which involves a sunk cost...
For each decision task, research participants rated how relatively likely they were to choose between two options, one of which involved accepting a sunk cost. Rogge then uses the responses from the six decision tasks to derive a score for susceptibility to the sunk cost fallacy. He also knows how long each research participant spent on each decision task, which he uses to proxy for how thoughtfully they considered the options (i.e. how much 'System 2' thinking was involved). Then, he uses propensity score matching to create a matched sample of research participants with ASD and neurotypicals, and analyses the differences in sunk cost score between the groups. He finds that:
...(a) the sunk cost did impact the decision made by the average participant across the six sunk-cost decision tasks... (b) participants with ASD were generally less subject to the sunk-cost bias as compared to neurotypical participants... (c) participants with ASD and more autistic traits (as measured by the AQ10-score) were generally less subject to the sunk-cost bias as compared to individuals with ASD and less autistic traits (and neurotypical individuals)... (d) the time to complete a sunk-cost decision task related negatively to the sunk-cost bias for participants with ASD... and (e) this negative relation between time spent in the decision task and the sunk-cost bias was more pronounced for individuals with more autistic traits as compared to their counterparts with less autistic traits (both ASD and neurotypical)...
So, score a win for people with ASD. They are less susceptible to the sunk cost fallacy, and consistent with that, they spend more time on the decision tasks than neurotypicals do. That doesn't answer the bigger question of 'why', but it does demonstrate that people with ASD have more rational decision-making processes in this context.
Of course, there are some problems with this study, and it needs replication in other samples. The biggest issue is the nature of the hypothetical scenarios. It would be interesting to see if similar results would be found in an experimental setting, rather than in an online survey. Also, this type of study could easily be extended, as Rogge notes in his conclusion:
It would be interesting for future studies to measure and compare the sunk-cost bias of individuals with ASD and neurotypical individuals in real-world decision scenarios involving sunk costs and explore the role of, for instance, social and communication skills in sunk-cost bias. Another research question consists in exploring whether individuals with ASD take hypothetical and experimental tasks more seriously and, if so, whether this explains for why they make more consistent and less biased decisions than neurotypical individuals.
Both of those options would be worthwhile additions to the growing research literature on decision-making among people with ASD.
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