Trapped in the Past: How Sunk Cost Effect and Constraints Shape Decision-Making in Public Works in Municipal Public Works
DOI:
https://doi.org/10.5380/rcc.18.100251Abstract
Cost management from a behavioral theoretical perspective contributes to understanding the decision-making process, especially when considering irrecoverable costs (sunk costs). This theory examines how past expenditures influence future decisions, contrasting with the logic of classical economic theory. This study aimed to analyze how constraints affect the execution of public works and lead to decisions influenced by sunk cost. To this end, a case study was conducted using interviews, observations, and document analysis, seeking to deepen the understanding of the relationship between systemic constraints and decisions based on prior investments. The results indicate that physical, political, and managerial constraints, such as failures in initial and ongoing planning, poorly defined schedules, and premature decisions contribute to a pattern in which, after the project’s first interruption, managers begin to justify their decisions based on the resources already invested, demonstrating the sunk cost effect. The main contribution of the study is to show that system constraints act as triggers for decisions driven by sunk cost. This finding helps explain how such constraints, combined with cognitive biases, influence technical and political choices. By revealing this interplay, the study advances the analysis beyond traditional rational models and contributes to the development of more effective public management strategies grounded in realistic assessments of the limitations of the decision-making system.
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