[Marketing] Xing Zhang - Sunk Cost Effect, Self-control, and Contract Design
- SKKGSB
- Hit591
- 2023-11-02
Area | Marketing | |
---|---|---|
Faculty | Xing Zhang | |
Journal | Journal of Marketing Research | |
Title | Sunk Cost Effect, Self-control, and Contract Design |
SKK GSB Professor Xing Zhang, with co-authors from China, Singapore, and the US, has published a paper titled “Sunk Cost Effect, Self-control, and Contract Design,” in the Journal of Marketing Research, a premier marketing journal.
Abstract
Consumers often fall prey to the sunk cost fallacy, a canonical mistake in decision-making, when decisions are influenced by an irreversible (sunk) cost that has already been incurred. Prof.Zhang's paper uses the game theory to analyze the role of the sunk cost effect as a self-commitment device in counteracting self-control problems. Companies can leverage the sunk cost fallacy when designing pricing contracts: the upfront payment, often seen as a sunk cost, can serve as a powerful commitment device for consumers increasing their future engagement with service and maximizing companies' profits.
Keywords
#marketers #managers #BehaviorialEconomics #ConsumerPsychology #PricingStrategy #SKKGSB #SKKGSB_Faculty