Tuition Fees and Sunk-cost Effects

Abstract

This article 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 students’ income or parental contributions.

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