So, how do we make better decisions?
Limitations and Further Research
Despite my fairly large number of survey participants, this population was not representative of SCU students overall, SCU students are not representative of all college students in the U.S., and college students in the U.S. are not at all representative of 18-22 year-olds around the world.
So although I often say “students,” “people,” or even “humans,” know that while my claims may be true for these populations, I don’t know for sure. Even among Santa Clara students, my sample was overwhelmingly first-year and had a higher average GPA and income than the SCU averages.
I used several statistical tests, such as linear regression and two-sample T-tests, to analyze my data, and reported the results when applicable. I checked for correlation when differences based on one trait appeared obvious, but didn’t check for every correlation. While I believe these tests add validity to my conclusions, I’m not a statistician.
In an ideal world, I would have conducted a much larger survey nationwide (maybe even worldwide), with more sunk cost scenario questions, and more question pairs like my ticket examples. With a less homogeneous population, I would be able to better test for correlation between honoring sunk costs and variables such as stress, mindfulness, family background and cultural differences.
To support and add onto my survey conclusions, I found several academic researchers that provided relevant answers to my inquiry about decision-making.
My survey lead me to three primary conclusions:
1. The sunk cost fallacy exists
Students were much more likely to buy another ticket when the loss of $10 was framed as a sunk cost. This behavior is consistent with nearly all previous research on the subject, demonstrating that past investments matter in our decisions.
2. Age and experience lead to better decisions
For the two academic scenario questions, first-year students were much more likely to finish the class or the major that wouldn’t help them than older students. Across the board for all three questions, seniors were 14% less likely to honor sunk costs than first-years. With experience comes wisdom and better decision-making.
3. Engineers were much less likely to honor sunk costs
For every question, engineering students showed the lowest likelihood to honor sunk costs. Although the sample size was relatively small, I think that something about the logical engineering problem-solving process may have contributed to the outcome. Further research would be necessary to test this hypothesis.
Older adults make better decisions
One factor that affects our decision-making isn't in our control. Researcher Wandi Bruine de Bruin and her team confirmed their hypothesis that older adults were less likely to fall victim to the sunk cost fallacy and better able to cope when faced with irrecoverable losses. Older adults avoided ruminating on their decisions or feeling regret as much as younger adults, improving their ability to only consider relevant factors when deciding.
This research confirmed other studies that older adults tend to make decisions that enhance their well-being more often than younger adults. Intuitively, it makes sense that adults with more life experience are better at discerning what will make them happy in the present without considering what other people may think, or what may have happened in the past. As we get closer to death, we have less of a reason to do something just because we’ve spent time on it in the past.
Older adults make better decisions and are better at avoiding negative feeling like regret, but we don’t have to wait until we’re older to improve our decision-making.
Could mindfulness improve decision-making?
In four experiments, organizational behavior professor Andrew C. Hafenbrack showed that research participants who reported higher levels of mindfulness, as well as those who participated in 15-minute breathing-focused meditation sessions were more likely to make rational decisions.
The authors propose that mindfulness and meditation decrease the likelihood of individuals to weight sunk costs in their decisions because these practices help individuals focus on the present and reduce negative feelings of anxiety and regret. The first study demonstrated a link between the tendency to honor sunk costs in decisions and low levels of mindfulness, as measured by the Mindful Attention Awareness Scale.
In the next two studies, the researchers led one group of participants through guided 15-minute meditation sessions asking them to focus attention on their breathing, while the control group listened to a track prompting subjects to think of whatever came to mind. The proportion of subjects that resisted honoring sunk costs in the meditation group was double that of the control group, demonstrating a positive correlation between meditation and resisting the sunk cost fallacy.
The link between mindfulness and better decision-making makes sense; mindfulness inherently focuses us on the present moment, and sunk costs are past investments.