Journal article
Impact of Cognitive Biases on Decision Making by Financial Planners: Sunk Cost, Framing and Problem Space
International Journal of Economics and Finance, Vol.2(1), pp.11-22
2010
Abstract
The aim of this paper is to test the existence of the framing effect and sunk cost effect whilst examining the influence ofcognitive factors. The approach to this research involved combing two frameworks, Prospect Theory and ImageTheory, to analyse the outcomes of financial decision making from a survey of financial planners. The findings confirmthe existence of the framing effect and a sunk cost effect. In particular the lowering of the amount of sunk cost produceda higher mean funding outcome than that attained in the positive frame. With regards to cognitive factors a significantcorrelation between perception of responsibility and the amount of funding granted was identified. This is consistentwith the existence of escalation commitment behaviour, which is considered to be a manifestation of feelings ofresponsibility. The perception of the problem space produced an unexpected set of results. In particular both low imagecompatibility and high image compatibility were significant predictors of the level of funding granted.
Details
- Title
- Impact of Cognitive Biases on Decision Making by Financial Planners: Sunk Cost, Framing and Problem Space
- Authors
- Gregory Laing (Author) - University of the Sunshine Coast - Faculty of Business
- Publication details
- International Journal of Economics and Finance, Vol.2(1), pp.11-22
- Publisher
- Canadian Center of Science and Education
- Date published
- 2010
- DOI
- 10.5539/ijef.v2n1p11
- ISSN
- 1916-971X; 1916-971X
- Copyright note
- Copyright © 2010 The Authors. Reproduced here in accordance with the copyright policy of the publisher. This work is licensed under a Creative Commons Attribution 3.0 License.
- Organisation Unit
- University of the Sunshine Coast, Queensland
- Language
- English
- Record Identifier
- 99450111302621
- Output Type
- Journal article
- Research Statement
- false
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