Tuition fees and sunk-cost effects

Nadine Ketel
Jona Linde
Hessel Oosterbeek
Bas van der Klaauw

Economic Journal, forthcoming.

Abstract
This paper reports on a field experiment testing for sunk-cost effects in an education setting. Students signing up for extra-curricular tutorial sessions randomly received a discount on the tuition fee. The sunk-cost effect predicts that students who pay more will attend more tutorial sessions, with possibly beneficial effects on their performance. For our full sample, we find no support for this hypothesis, neither on attendance nor on performance. Results are consistent with a sunk-cost effect for the subsample of students who, based on hypothetical survey questions, are identified as sunk-cost prone. We do not find differential effects by studentsí income or parental contributions.

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Last updated: May 29, 2015.