Jackie put a $400 deposit on a new sofa. She has since found a different sofa that she likes better, but she still plans to buy the first one so as not to lose her deposit. Jackie is subject to
A) a framing bias.
B) overvaluing the present relative to the future.
C) overconfidence.
D) a sunk cost fallacy.

Question

Quizplus · Accepted Answer

Jackie is subject to a sunk cost fallacy because she is making a decision based on the amount already invested (the $400 deposit) rather than the current and future benefits and costs of the choices available to her. The money spent on the deposit cannot be recovered, so it should not influence her decision on which sofa to buy.

Jackie Put a $400 Deposit on a New Sofa