We develop a behavioral model of durable good usage with mental accounting for sunk costs. It predicts higher-than-rational usage that attenuates at a rate that increases with sunk costs. Singapore government policy varied the sunk cost of buying a new car. Using Singapore data, we estimate the...

Automobile markets are a prime example of the several steps in the second wave of globalization. While after the II WW US car companies moved to produce in the European Communities to exploit proximity to market and economies of scale, the second wave was characterized by the move in production...

Does the sunk cost fallacy affect decision-makers in high-stakes situations? We develop a behavioral model of usage of a durable good with mental accounting for sunk costs. It predicts that usage increases in the sunk cost, and attenuates with time at a rate that increases in the sunk cost. The...