Mental depreciation and marginal decision making

Article Abstract:

Investment decisions are easily made when people can align the timing of costs and benefits. However, when this integration is difficult, people attempt to make the correlation through mental depreciation. They spread the fixed cost over time and use. This accounting practice is impractical, because it does not consider marginal costs and benefits and bases decisions on past or sunk cost. It can also lead to erroneous marginal decisions and may even actually increase loss. This individual practice may even be carried out at the organizational level.

Capital Management-Depreciation, Cost Accounting, Economic aspects, Economics, Overhead costs, Depreciation

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Interaction with others increases decision confidence but not decision quality: evidence against information collection views of interactive decision making

Article Abstract:

Interactive decision making where decision makers are made to consult with others prior to their final decision is analyzed. Results show that interaction improved the decision maker's confidence but did not increase decision accuracy. It was also recommended that interaction be considered a rationale construction rather than information collection since interaction requires individuals to justify their decisions.

Interpersonal relations, Social interaction

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Escalation and de-escalation of commitment in response to sunk costs: the role of budgeting in mental accounting

Article Abstract:

The impact of sunk costs on investment behavior is analyzed. Results show that most individuals decline investments that include sunk costs. On the other hand, individuals increase their investments in the absence of a set budget, when additional investments cannot be determined and when there is no information about future benefits. Higher returns are also perceived for investments with higher sunk costs.

Financial planning

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