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DOI 10.1007/s11002-011-9148-z
Effects of a regulatory match in sunk-cost effects:
A mediating role of anticipated regret
Junsik Kwak & Jongwon Park
# Springer Science+Business Media, LLC 2011
Abstract People are more likely to invest their money, time, and efforts to attain a
desired outcome if they have already devoted resources to its attainment than if they
did not. This “sunk cost effect” is robust and has been demonstrated in a wide
range of settings. Four experiments in the present research show that the effect is
significantly smaller under regulatory mismatch, i.e., when there is a mismatch
between the decision makers’ regulatory focus and the characteristics of the desired
outcome, than under regulatory match. This difference is not attributable to the
operation of value-from-fit but mediated by differences in future regret that people
anticipate experiencing when they fail to devote additional resources to the
attainment of the outcome, and consequently fail to realize it.
Keywords Sunk-cost effect . Escalation of commitment . Regulatory focus .
Anticipated regret . Behavioral decision theory
People who contemplate whether they should persist or withdraw a planned target
action toward a desired outcome should base their decision only on the incremental
cost and benefit of the action. Yet, they are more likely to persist if they have already
devoted resources to the attainment of the outcome than if they did not. This “sunk
cost effect” is robust across a variety of situations (Alessandria and Choi 2007;
Arkes and Blumer 1985; Heath 1995; Staw and Hoang 1995). Because the effect
means a failure to achieve the optimal consequence, identifying factors that can
reduce or eliminate the effect is of both theoretical and practical importance.
J. Kwak
Department of Business Administration, Dongseo University, Jure-Dong,
Sasang-Gu, Busan, South Korea
e-mail: [email protected]
J. Park (*)
Department of Business Administration, Korea University Business School,
1 Anam-Dong, Sungbuk-Gu, Seoul, South Korea
e-mail: [email protected]
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Drawing on the recent work on the role of anticipated regret in escalation of
commitments (Wong and Kwong 2007) and on regulatory focus theory (Higgins
1997), we posit that a regulatory match between decision makers’ regulatory focus and
the type of a desired outcome is an important determinant of a sunk-cost effect. Four
experiments demonstrate that a sunk-cost effect is significantly reduced under
regulatory mismatch, i.e., under situations in which decision makers are preventionfocused but the desired outcome is promotion-focused, and vice versa. This effect
generalizes over different sunk-cost situations. In addition, the effect is not attributable
to the operation of “value from fit” (Higgins 2000) but is mediated by the difference in
the regret that people anticipate experiencing when they fail to devote additional
resources to the attainment of a desired outcome, and consequently fail to realize it.
1 Theoretical background
1.1 Sunk-cost effects
The phenomenon that a sunk cost escalates decision makers’ commitment to a
planned target action is demonstrated in a wide range of settings, including
individual decisions (Arkes and Blumer 1985; Garland and Newport 1991; Strough
et al. 2008), interpersonal decisions (Soman and Cheema 2001), new product
development (Biyalogorsky et al. 2006), financial decisions (Garland 1990; Heath
1995), purely behavioral investments (Cunha and Caldieraro 2009), performance
evaluation (Bazerman et al. 1982; Staw and Hoang 1995), and international trade
(Alessandria and Choi 2007). Also, the effect is evident not only when the sunk cost
is money, but also when it is time (Navarro and Fantino 2005; Soman 2001).
In addition, the sunk-cost effect occurs both when people attempt to redeem a
monetary sunk cost by investing more money (Arkes and Hutzel 2000; Garland
1990; Garland and Newport 1991; Heath 1995) and when they try to redeem a
monetary purchase cost for a product/service by committing non-monetary resources
such as time, effort, etc., to the actual consumption (Arkes and Blumer 1985;
Simonson and Nye 1992; Soman and Cheema 2001; Tan and Yates 1995). For
example, people who contemplate whether or not they should make a monetary
investment to complete an ongoing project with a pessimistic future are more likely
to throw in the money if they have previously invested money into the project than if
they did not. Likewise, people who contemplate whether or not they would go to a
basketball game under a bad weather and road condition are more willing to go if
they have purchased the ticket than if they have obtained it for free.
1.2 Anticipated regret as a psychological explanation
Various explanations have been offered to explain why a sunk cost escalates decision
makers’ commitment to a target action (Arkes and Blumer 1985; Arkes and Hutzel
2000; McCain 1986; Soman 2004; Staw 1976; Thaler 1999; Whyte 1993). These
explanations are quite successful in accounting for the general sunk-cost effect in
many situations. Nonetheless, they mostly rely on cognitive factors, such as self
justification, subjective judgments of a desired outcome, and personal responsibility.
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A more recent conceptualization, and the one that we adopted in our research,
considers the role of decision makers’ emotions in escalation of commitments
(Moon et al. 2003; Wong and Kwong 2007; Wong et al. 2006). This conceptualization focuses on anticipated regret, a future regret that people anticipate
experiencing when they choose to withdraw vs. persist a target action. Specifically,
it proposes that decision makers’ anticipated regret about withdrawal is an important
driver of the escalated commitment to the target action. As consistent with this,
Wong and Kwong (2007) showed that the escalated commitment was greater, as the
possibility of knowing the outcome of the withdrawal decision was higher and thus,
the level of anticipated regret was higher.
1.3 Implications for the role of regulatory match in sunk-cost effects
To the extent that decision makers’ anticipated regret mediates their escalated
commitment, the effect of a sunk cost on their commitment level should be
moderated by the factors that affect their anticipated regret. Several factors could
influence the anticipated regret. As mentioned earlier, Wong and Kwong (2007)
considered the possibility of knowing the outcome of the forgone option as a
determinant of the anticipated regret. The factor we consider in this research is a
match between decision makers’ regulatory focus and the type of the failed desired
outcome due to the decision to withdraw.
According to regulatory focus theory (Higgins 1997), individuals’ promotion
focus (vs. prevention focus) is characterized by a concern with advancement and
accomplishment (vs. a concern with duties and responsibilities) and by a
heightened sensitivity to the positive (vs. negative) outcomes of an action.
Consequently, individuals with a promotion focus, compared to those with a
prevention focus, tend to experience more negative emotions when they fail to
realize a positive outcome but less negative emotions when they fail to prevent
a negative outcome (Idson et al. 2000).
This has an implication for the present research. That is, when people imagine
that a desired outcome is failed due to their decision to withdraw a target action, they
are likely to anticipate experiencing regret about the decision. For example, people
who contemplate the decision to give up going to a basketball game might imagine
future negative feelings such as “I would have enjoyed a lot if I had gone to the
game.” This pre-factual emotion is likely to be strong when they have purchased the
ticket and thus have incurred a sunk cost, whereas it might be relatively minimal if
they have obtained the ticket for free. In addition, the magnitude of anticipated regret
in the former, sunk-cost condition is likely to depend on regulatory match between
the type of a failed desired outcome resulting from the withdrawal decision and the
type of decision makers’ regulatory focus. Specifically, prevention-focused individuals, compared to promotion-focused individuals, are less likely to anticipate
experiencing regret if the desired outcome is primarily promotion-focused (e.g.,
enjoyment of watching a basketball game), but are more likely to do so if the desired
outcome is prevention-focused (e.g., prevention of illness by getting a flu shot).
Consequently, the difference in anticipated regret between the sunk-cost and the nocost condition is likely to be smaller under regulatory mismatch than under
regulatory match. This would lead the sunk-cost effect on the level of commitment
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to a target action to be significantly smaller in the former condition than in the latter.
In sum, therefore, we hypothesized that the sunk-cost effect on the level of
commitment would be significantly smaller under regulatory mismatch than under
regulatory match and that this difference would be mediated by a difference in
anticipated regret about the decision to withdraw the target action.
Results from the study by Higgins et al. (2001) are suggestive. Participants in
their study received scenarios in which a high sunk cost was already incurred, and
then determined whether or not they would stick to a planned target action. On one
scenario in which the sunk cost was likely to lead to an omission error (i.e., saying
“no” when one should say “yes”), participants' tendency to make the error was
negatively correlated with their promotion scores but uncorrelated with their
prevention scores. However, on the other scenario that concerned a commission
error (i.e., saying “yes” when one should say “no”), participants' tendency to make
the error was uncorrelated with their promotion scores but negatively correlated with
their prevention scores, suggesting that regulatory focus might moderate the sunkcost errors differently, depending on the characteristics of scenarios. Nonetheless, in
their study, a lower sunk-cost or no sunk-cost condition was not included as a
baseline condition. Thus, it is uncertain whether the observed effects reflected a
moderation in the sunk-cost effect (i.e., a moderation in the difference between the
sunk cost and the base line condition) or a general effect that is independent of sunk cost.
In addition, their results were based on correlation analyses and no mediation test was
conducted. Thus, the results might be open to alternative explanations. In fact, our
research will show that the direction of the moderating effect of regulatory focus is not a
function of the type of sunk-cost errors of scenarios (omission vs. commission error) but
depends on the type of a failed desired outcome from the withdrawal decision.
Consequently, the magnitude of a sunk-cost effect can be either larger or smaller among
individuals with a promotion focus than among those with a prevention focus, regardless
of whether a scenario concerns a commission error or an omission error.
In sum, the present research intends to extend the previous research by providing
more direct evidence for the moderating effect of regulatory match on the sunk-cost
effect and the mediation role of anticipated regret. In doing so, the research
documents unique findings that have not previously been reported. Specifically,
experiment 1 confirmed the moderation effect of regulatory match in a scenario in
which the desired outcome of a target action was promotion-focused in nature (i.e.,
attaining a positive outcome). Experiments 2a and 2b showed a reversed pattern of
this moderation when the desired outcome was prevention-focused in nature (i.e.,
preventing a negative outcome.) Then, experiments 3 and 4 replicated both effects
given a single kind of scenario within which the type of desired outcome of a target
action was experimentally varied and in addition, provided direct evidence that the
effects were mediated by anticipated regret.
2 Experiment 1(promotion-focused scenario)
Experiment 1 evaluated the role of regulatory match in the sunk-cost effect in a
scenario in which the desired outcome of a target action was promotion-focused in
nature. In this case, we expected that the sunk-cost effect on the level of decision
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makers’ commitment to a target action (i.e., the difference in commitment between
sunk-cost and no-cost conditions) would be strong among participants with a
promotion focus but would be less evident among those with a prevention focus.
A total of 98 undergraduate students participated in the experiment to fulfill a course
requirement and were randomly assigned to conditions representing each combination of
sunk-cost (sunk-cost vs. no-cost) and regulatory focus (promotion focus vs. prevention
focus). Upon arrival, participants were told that they would perform two independent
tasks. The first task, which was designed to manipulate participants’ regulatory focus,
was introduced as a student life survey. As in Higgins et al. (1994; see also Shine, Park,
and Wyer 2007), participants in the promotion-focus condition were asked to write
down the things they wished to achieve and the ways they might accomplish them,
whereas those in the prevention-focus condition were asked to list the things that posed
obstacles to their duties and obligations and the ways they might avoid them.
After the student life survey, participants performed a second, ostensibly unrelated
task, which was introduced as a consumer decision study. Participants were first
asked to imagine that (1) they had a ticket for a music concert of their favorite kind,
(2) the weather and the road conditions on the concert day were bad, and (3) it was
impossible to either reimburse the ticket or transfer it to someone else. With this
preamble, participants were further instructed to assume either that they had
purchased the ticket for $30 (sunk-cost condition) or that they had obtained it for free
(no-cost condition). Then, all participants were asked to determine if they would go
to the concert in the given situation.
The proportions of participants who decided to attend the concert were analyzed
by a logistic regression with sunk-cost and regulatory focus as independent
variables. As expected, the sunk cost significantly increased participants’ likelihood
of attending the concert in the promotion focus condition (from 0.22 to 0.52, Wald=
4.62, p<0.05) but not in the prevention focus condition (from 0.32 to 0.23, Wald=
0.46, p>0.10). This difference was confirmed by a significant 2-way interaction of
sunk-cost and regulatory focus (Wald=3.90, p<0.05).
3 Experiments 2a and 2b (prevention-focus scenarios)
Experiment 1 confirmed the role of regulatory match when the withdrawal decision
was likely to induce promotion-focused anticipated regret. The present experiments
examined the role of regulatory match in scenarios in which the desired outcome of a
target action was prevention of a negative outcome and thus the withdrawal decision
was likely to elicit prevention-focused anticipated regret. In this case, we expected
that the effects observed in experiment 1 would be reversed, i.e., the sunk-cost effect
would be significantly smaller among participants with a promotion focus than
among those with a prevention focus.
4 Method
A total of 105 undergraduate students in experiment 2a and 97 in experiment 2b
participated to fulfill a course requirement. In each experiment, participants were
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randomly assigned to four combinations of sunk-cost (sunk-cost vs. no-cost) and
regulatory focus (prevention vs. promotion focus).
The experimental procedure was virtually identical to the procedure employed in
experiment 1, except that participants in each experiment received a preventionfocused sunk-cost scenario. Specifically, participants in experiment 2a received a
“radar-blank plane” scenario that was employed in prior research (Arkes and Blumer
1985, study #3). That is, participants received a description of an ongoing, 10million-dollar project, called “radar-blank plane project,” which was 90% complete
but that was almost certain to end in a disappointing outcome. Participants in the
sunk-cost condition were then asked to assume that they had invested the 9 million
dollars in the project and then to decide if they would put the final 1 million dollars
into the project. In this case, the decision to throw in the money would prevent them
from being an irresponsible person for their prior investment. Thus, if they imagine
that they have failed to prevent being an irresponsible person by deciding to give up
the project, it would induce prevention-focused anticipated regret about the decision.
By contrast, participants in the no-cost condition were told to assume that they had
made no prior investment in the project, but were called upon to decide if they
would invest the final 1 million dollars to complete the project.
Participants in experiment 2b received a flu shot scenario and determined if they
would go for a shot in an adverse condition. Specifically, participants were asked to
imagine that they had an appointment for a prepaid flu shot. Then, they were
instructed to assume either that they had paid $40 for the shot (sunk-cost condition)
or that the university had prepaid for it (no-cost condition). After this, all participants
were asked to further assume that they had recently had one of their ankles sprained
and thus had some difficulties in walking or driving, that the weather and road
conditions were bad, and that the appointment could not be rescheduled or
transferred to someone else. Then, they were asked to determine if they would go
to the hospital for a flu shot under these conditions. In this case, the decision to give
up the flu shot was likely to induce prevention-focused anticipated regret, i.e., regret
about the failure to prevent illness.
5 Results
A preliminary analysis of the data as a function of sunk cost (sunk-cost vs. no-cost),
regulatory focus (promotion focus vs. prevention focus), and scenario (radar-blank plane
vs. flu shot) revealed that the last variable did not interact with other variables (F<1).
Thus, we report results from the combined data over the two scenarios for simplicity.
Because the desired outcome of a target action in both scenarios was preventionfocused in nature, we expected that the sunk-cost effect would be strong in the
prevention focus condition but would be less apparent in the promotion focus
condition. This prediction was confirmed. As shown in Table 1, participants were
more likely to engage in the target action in the sunk-cost condition than in the nocost condition (0.76 vs. 0.34; Wald=33.27, p<0.001). As expected, however, this
difference was smaller in the promotion-focus condition (0.63 vs. 0.41) than in the
prevention-focus condition (0.88 vs. 0.27), which was evidenced by a significant
interaction of sunk-cost and regulatory focus (Wald=9.48, p<0.005).
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Table 1 Dependent measures as a function of regulatory focus and sunk cost (Experiments 2 and 3)
Dependent measures
Prevention focus
Promotion focus
No-cost Sunk-cost
No-cost Sunk-cost
Experiment 2 (prevention-focus scenarios)
Proportions of engaging in target action
Radar-blank plane scenario
0.42
0.88
0.54
Flu shot scenario
0.12
0.88
0.29
0.68
0.59
Total
0.27a*
0.88b
0.41a
0.63c
Experiment 3 (promotion-focused version of “radar-blank plane” scenario)
Proportions of investment decisions
0.62a
0.76a
0.57a
0.97b
Net anticipated regret**
0.33a
0.35a
−0.44a
1.66b
*
Entries with no common subscript given a row are significantly different from each other at p<0.05
**
The score was calculated by subtracting the anticipated regret rating about the decision to invest from
the anticipated regret rating about the decision to withdraw
6 Experiment 3 (promotion-focused version of “radar-blank plane scenario”)
Experiments 1 and 2 confirmed the hypothesized moderation role of regulatory
match by showing the diametrically opposite effects of regulatory focus on the sunkcost effect, depending on promotion-focused vs. prevention-focused scenarios. That
is, the sunk-cost effect was significantly smaller in the prevention focus condition
than in the promotion focus condition under a promotion-focused scenario (e.g.,
“concert ticket scenario” in experiment 1), whereas the opposite was true under a
prevention-focused scenario (e.g., “radar-blank plane scenario” in experiment 2a).
Our conceptualization assumes that this divergence was due to the difference
between the scenarios in terms of the type of the desired outcome of a target action
and thus the difference in the type of anticipated regret about the withdrawal
decision (i.e., promotion-focused vs. prevention-focused anticipated regret), not due
to other differences between the scenarios.
The present experiment provided evidence for this assumption in two ways.
First, we modified the “radar-blank plane scenario” of experiment 2a such that
the desired outcome of the target action would become more promotion-focused
and then showed that the effects obtained in experiment 2a were reversed.
Second, we directly measured the level of participants’ anticipated regret and
showed that the effects observed in participants’ decisions were mediated by
their anticipated regret.
7 Method
A total of 136 undergraduate students participated to fulfill a course
requirement. They were randomly assigned to four combinations of sunkcost (sunk-cost vs. no-cost) and regulatory focus (prevention vs. promotion
focus).
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The experimental procedure was virtually identical to the procedure employed in
experiment 2a with two exceptions. First, the “radar-blank plane” scenario was
modified to concern more promotion-focused than prevention-focused anticipated
regret. Specifically, the modified version informed participants that the outcome of
the project would be disappointing with almost certainty, as the original version did.
Then, it added a note that there might be a small chance to turnaround the future if
some very creative changes in the exterior component can be immediately made.
This “silver lining” message was likely to lead the desired outcome of a target action
to become promotion-focused (i.e., “attaining a dramatic success”) rather than
prevention-focused (i.e., “avoiding a blame for being irresponsible”). Second,
participants’ anticipated regret about the decision alternatives was assessed.
Adopting the procedure in Wong and Kwong (2007), participants after determining
their decision about the final investment were asked to indicate the extent to
which they might anticipate experiencing regret about the decision to persist
and about the decision to withdraw separately, along seven-point scales ranging
from 1 (not at all) to 7 (very much). Later, an index of net anticipated regret
was constructed by subtracting the rating of “persistence regret” from the rating of
“withdrawal regret.”
8 Results
8.1 Decisions
Because the desired outcome of a target action was now promotion-focused, we
expected that the results of experiment 2a would be reversed. That is, the sunk-cost
effect would be smaller in the prevention focus condition that in the promotion focus
condition. This expectation was confirmed.
Participants were more likely to invest the final money in the sunk-cost condition
than in the no-cost condition (0.86 vs. 0.59; Wald=10.45, p<0.001). However, this
difference was qualified by a significant interaction of sunk-cost and regulatory focus
(Wald=4.28, p<0.05). As shown in Table 1, the sunk-cost effect was substantial in the
promotion-focus condition (0.97 vs. 0.57; Wald=8.80, p<0.005) but was negligible in
the prevention-focus condition (0.76 vs. 0.62; Wald<1, p>0.10), as expected.
8.2 Net anticipated regret as mediator
Not surprisingly, the sunk cost generally increased participants’ net anticipated regret
(from −0.05 to 1.00; p<0.05). As shown in Table 1, however, this difference was
negligible in the prevention focus condition (0.33 vs. 0.35; diff=0.02; F<1) but was
significantly pronounced in the promotion focus condition (−0.44 vs. 1.66; diff=
2.10; F(1, 129)=7.47, p<0.005), as expected. In addition, a reanalysis of
participants’ decisions with the net anticipated regret being included as a covariate
reduced the original interaction effect of sunk-cost and regulatory focus to marginal
significance (Wald=3.25, p>0.05), while the covariate itself was a significant
predictor (Wald=21.33, p<0.001). This confirms the hypothesized mediating role of
anticipated regret.
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9 Experiment 4 (promotion-focused vs. prevention-focused version of “concert
ticket scenario”)
Experiments 1–3 demonstrated that the moderating influence of regulatory focus on the
sunk-cost effect diverged in the ways consistent with our expectation. In addition, results
of experiments 2 and 3 in combination suggested that the direction of the moderation
depended on the promotion-focused vs. prevention-focused desired outcome of a target
action. Nevertheless, it seemed desirable to replicate the diverging effects in a single
study in which the type of desired outcome of a target action of a single kind of scenario
was experimentally manipulated. The present experiment accomplished this objective.
In addition, it tested the mediation role of anticipated regret based on participants’
thought protocols about the anticipated regret rather than their self-report ratings of the
anticipated regret. Finally, the study employed mock advertisements as target stimuli to
increase the managerial relevance of findings.
10 Method
A total of 233 undergraduate students participated to fulfill a course requirement.
They were randomly assigned to combinations of a 2 (sunk cost)×2 (ad type)×2
(regulatory focus) factorial design.
Participants’ decision task was to determine if they would attend a music concert
under a bad weather and road condition, as in experiment 1. The experimental
procedure was similar to that of experiment 1 with two exceptions. First, we
manipulated the type of desired outcome of attending the concert. Specifically, at the
beginning of the concert ticket scenario, participants were shown one of the two
versions of ad about a music concert, depending on ad type conditions. One version
emphasized attainment of a positive outcome (promotion-focus ad) and the other
emphasized prevention of a negative outcome (prevention-focus ad). As suggested
by the previous research (Aaker and Lee 2001), we varied the ad headline as either
“This concert will bring great joy and energy to life… So come and enjoy it”
(promotion-focus ad) or “This concert will free you from stress and worries about
exams, grades, jobs….So, don’t miss it” (prevention-focus ad). All other aspects of
the ad were kept constant across the two ads. After this, participants received the
sunk-cost scenario and decision task instructions, as in experiment 1. Second,
participants, after having indicated whether or not they would attend the concert,
were asked to write down their thoughts and feelings that came to mind during the
decision. These verbal protocols were later used to examine the mediation role of
anticipated regret.
11 Results
11.1 Attendance decisions
A logistic regression of the proportions of participants who decided to attend the
concert as a function of sunk cost, ad type, and regulatory focus yielded the
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hypothesized three-way interaction of these variables (Wald=4.57, p<0.05). As
shown in Table 2, the sunk-cost effect (i.e., the difference between the sunk-cost and
no-cost conditions) was strong in the two regulatory-match conditions, i.e., when
prevention-focused participants examined the prevention-focus ad (0.67 vs. 0.07,
Wald=14.24, p<0.005) and when promotion-focused participants examined the
promotion-focus ad (0.54 vs. 0.18, Wald=7.19, p<0.01). By contrast, the effect was
less evident in the two regulatory-mismatch conditions, i.e., when preventionfocused participants processed the promotion-focus ad (0.45 vs. 0.25, Wald=
2.88, p>0.05) and when promotion-focused participants processed the preventionfocus ad (0.33 vs. 0.14, Wald=2.93, p>0.05).
11.2 Verbal protocols about anticipated regret as mediator
Participants’ verbal protocols regarding thoughts and feelings that came to mind
during their decisions were classified by two independent judges as “withdrawal
regret” (i.e., regrets related to the decision to withdraw; e.g., “I would regret later if I
miss the concert”), “persistence regret” (i.e., regrets related to the decision to persist;
e.g., “It would be terrible if I get into trouble on the way to the concert in that
weather”), or “other” category. The inter-judge reliability was 85% and the
disagreements were resolved through discussion. According to our conceptualization, the sunk cost (vs. no cost) would generally increase the number of withdrawal
regrets, but this effect should be significantly smaller under regulatory mismatch
than under regulatory match. This, in fact, was the case.
A mixed ANOVA of numbers of withdrawal regrets vs. persistence regrets as a
function of the experimental variables yielded a significant four-way interaction of
ad type, regulatory focus, sunk cost, and regret type (F(1, 225)=5.08, p<0.05). This
interaction was diagnosed by separate analyses of withdrawal regrets and persistence
regrets. First, as shown in Table 2 and as expected, the sunk-cost effect on
withdrawal regret (i.e., the difference between the sunk-cost and no-cost conditions
Table 2 Decisions and Anticipated Regret as a Function of Ad type, Regulatory Focus, and Sunk Cost
(Experiment 4)
Dependent measures/Ad type
Prevention focus
Promotion focus
No-cost Sunk-cost
No-cost Sunk-cost
Proportions of attendance decisions
Prevention-focus ad
0.07a*
0.67c
0.14ab
0.33b
Promotion-focus ad
0.25ab
0.45b
0.18a
0.54b
Number of regrets related to “withdrawal” decision
Prevention-focus ad
0.07a
1.00c
0.17ab
Promotion-focus ad
0.38a
0.86b
0.21a
53b
1.07b
a
0.50
a
0.75
a
0.66
a
a
0.70
a
0.60
a
0.46
a
Number of regrets related to “persistence” decision
Prevention-focus ad
0.74
Promotion-focus ad
0.80
*Entries with no common subscript given a row are significantly different from each other at p<0.05
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in numbers of withdrawal regrets) was smaller under regulatory mismatch (Mdiff =
0.48 in the promotion-ad/prevention-focus condition and Mdiff = 0.36 in the
prevention-ad/promotion-focus condition) than under regulatory match (Mdiff =0.93
in the prevention-ad/prevention-focus condition and Mdiff =0.86 in the promotion-ad/
promotion-focus condition). This was confirmed by a significant two-way
interaction of sunk-cost (sunk-cost vs. no-cost) and regulatory match (match vs.
mismatch; F(1,229)=4.87, p<0.05). By contrast, similar analyses of persistence
regrets produced no significant main or interaction effects of the experimental
variables (F<1).
To examine our hypothesis that the effects observed in participants’ attendance
decisions were mediated by anticipated regret about decision, the net anticipated
regret score was calculated by subtracting the number of persistence regrets from the
number of withdrawal regrets and then was included as a covariate in a reanalysis of
participants’ attendance decisions. This analysis reduced the original three-way
interaction effect of sunk-cost, ad type, and regulatory focus to non-significance (Wald=
0.88, p>0.10), while the covariate itself was a significant predictor (Wald=55.99, p<
0.001), thus confirming the hypothesized mediation role of anticipated regret.
12 General discussion
The literature suggests that the sunk-cost effect is robust. According to our research,
the effect is significantly reduced under regulatory mismatch, i.e., when the decision
makers’ regulatory focus does not match the type of desired outcome of a target
action. Consequently, the sunk-cost effect was negligible when promotion-focused
individuals made a decision in a situation in which the desired outcome of a target
action was prevention-focused in nature or when prevention-focused individuals
made a decision in a situation in which the desired outcome of a target action was
promotion-focused in nature.
These diverging effects were assumed to be mediated by the anticipated regret
about the decision to withdraw. Evidence for this assumption was obtained in
experiments 3 and 4. That is, the effects on participants’ commitment to a target
action were reduced to non-significance when the analyses included participants’
anticipated regret as a covariate. Further, this was true regardless of whether the
anticipated regret was measured by self-report ratings as in Wong and Kwong (2007)
or by thought protocols. More generally, these results are in line with the literature
suggesting that people minimize future negative emotions in making decisions
(Loewenstein and Lerner 2003; Zeelenberg et al. 1996).
Higgins et al. (2001) showed that on the “ski trip scenario” in which the sunk cost
led to an error of omission (i.e., the error of missing a more enjoyable ski trip to
Wisconsin simply because a larger cost was paid for a ski trip to Michigan that
would take place at the same time), the level of participants’ promotion focus had a
significant influence on the sunk-cost errors. By contrast, on the “radar-blank plane
scenario” in which the sunk cost led to an error of commission (i.e., the error of
making additional investment on the project with a pessimistic future just because
initial investment was already made), the level of participants’ prevention focus had
an influence on the sunk-cost errors. The authors assumed that this divergence was
Mark Lett
due to the general tendency that individuals with a promotion focus make more
commission errors and fewer omission errors than those with a prevention focus.
However, our research suggests that the diverging effects of regulatory focus are
due to the different types of the desired outcome (i.e., prevention-focused vs.
prevention-focused outcome), not due to the different types of the sunk-cost error (i.e.,
error of omission vs. error of commission) of scenarios. Specifically, experiments 2 and
3 showed that on the same “radar-blank plane scenario” (which concerned an error of
commission), the sunk-cost effect could be either greater or smaller among participants
with a promotion focus than those with a prevention focus, depending on the type of the
desired outcome of investing the final $1 million to the project. To generalize this
further, we ran a small study (n=45) with a procedure identical to that of the “ski trip
scenario” experiment by Higgins et al. (2001), except that we described the objectively
more desirable ski trip option (i.e., a trip to Wisconsin) as equally enjoyable as but
having a safer road condition than the other option (whereas Higgins et al. (2001)
described the Wisconsin trip as more enjoyable). Thus, the desired outcome of the
Wisconsin option was prevention-focused rather than promotion-focused, while the
sunk-cost error (i.e., missing the Wisconsin trip because a higher price was paid for the
Michigan trip) was still an omission error. In this case, we expected that the results
obtained by Higgins et al. (2001) would be reversed. This in fact was the case.
Logistic regression analyses indicated that the sunk-cost error was significantly
correlated with participants’ prevention scores (Wald=5.30, p<0.05) but was
uncorrelated with their promotion scores (Wald=0.76, p>0.10), contrary to the results
reported in Higgins et al. (2001).
One might consider an alternative explanation for our results based on the notion
of “value from fit” (Higgins 2000). That is, additional value from regulatory fit can
be added to an evaluation object when individuals’ regulatory focus matches the
type of regulatory strategy involved. This additional value could increase
participants’ commitment to the target action in our experiments, independently of
other considerations. Although we do not have a direct assessment of the value-from-fit,
two aspects of our results question the validity of the alternative explanation. First, if
value from fit operates in our regulatory match conditions, it should increase
participants’ commitment to the target action in both sunk-cost and no-cost condition
under regulatory match. As a consequence, the difference in commitment between
sunk-cost and no-cost conditions (i.e., the sunk-cost effect on commitment) should be
quite similar regardless of regulatory match vs. mismatch. Contrary to this, our results
show that the sunk-cost effect was significantly smaller under regulatory mismatch
than under regulatory match, as we predicted. Second, if the value from fit were
responsible for the pattern of participants’ commitment, it should have a similar effect
on participants’ subjective value of the desired outcome, but it did not.
On the other hand, our finding that regulatory match did not increase participants’
commitment under no sunk cost might suggest that value from fit may not operate
when the object being evaluated is free and the situation for using it is difficult.
Future research that replicates and extends this is warranted.
Nonetheless, a caution needs to be taken not to over-generalize our conclusions.
The present research assessed the sunk-cost effect using hypothetical scenarios.
Although we followed the tradition of scenario-based studies, future research that
replicates our findings in real choices is warranted.
Mark Lett
Finally, to address the issue of concern in the present research, we have taken a
manipulation that affects escalation bias, measured anticipated regret, and showed
that anticipated regret mediates or explains the manipulation effects. Future research
that would do this over a wide enough range of factors that were shown to affect
escalation bias is warranted, as it will show the generality and domain boundaries of
the anticipated regret explanation for escalation bias.
Acknowledgments This article is based in part on the dissertation research conducted by Junsik Kwak
under the supervision of Jongwon Park. The authors gratefully acknowledge members of the dissertation
committee and members of Korea University B.E.S.T. Marketing Lab for their valuable suggestions
pertaining to the theoretical basis for the study and the interpretation of the results. The authors also thank
Prof. Robert Wyer for valuable inputs on earlier versions of this article, and the editor and the anonymous
Marketing Letters reviewers for their thoughtful comments and guidance.
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