How to Use the Sunk Cost Effect Wisely to Increase Revenue

Take Live Sports Software as an Example

DOI

10.2991/aebmr.k.220603.132How to use a DOI?

Keywords

Sunk cost; Behavioral decision-making; Paid applications; Psychology; Behavioral Economics

Abstract

The sunk cost effect is the choice to act in an irrational way by dwelling on past payoffs to avoid the negative emotions associated with losses. Today, the theory of sunk costs effect itself is well researched, and in some studies, sunk costs effect has been specifically applied. For example, the banking industry is looking at ways to prevent non-performing loans by looking at ways to avoid the sunk cost effect. The purpose of this study is to identify the most common decision-making behavior of consumers when faced with a sunk cost problem, and through their irrational decisions operators can gain access to arbitrage opportunities. This study uses the paid use of live sports software as an entry point, completed by questionnaires and data analysis. The study found that consumer decision making behavior can be driven by the use of sunk cost strategies, once consumers have spent money on live sports software for some reason, up to three-quarters of the population experience a sunk cost effect and their irrational decisions drive them to make further purchases, even if the event being shown is one they do not like. Through this discovery, the sunk cost effect can be effectively used to increase consumer stickiness and loyalty to a product.

Copyright

© 2022 The Authors. Published by Atlantis Press International B.V.

Open Access

This is an open access article distributed under the CC BY-NC 4.0 license.

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TY  - CONF
AU  - Chang Chen
PY  - 2022
DA  - 2022/07/01
TI  - How to Use the Sunk Cost Effect Wisely to Increase Revenue
BT  - Proceedings of the 2022 2nd International Conference on Enterprise Management and Economic Development (ICEMED 2022)
PB  - Atlantis Press
SP  - 811
EP  - 815
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.220603.132
DO  - 10.2991/aebmr.k.220603.132
ID  - Chen2022
ER  -