A PARADOX OF DIMINISHING EXPECTATIONS AND INCREASING VALUE FOR MONEY

Investments made in the form of a succession of nonrefundable cash pay ments, nth payoff at completion and no obligation at any stage to comp lete, have the characteristic of becoming more attractive as more paym ents are made. This is on the condition that any decline in the invest or's expectations occurs at a slower rate than the reduction between i nstallments in the cost-to-complete Decision makers inr involved in su ch investments have rational grounds for completion despite their poss ibly much diminished expectations. Interestingly, however, the reasons for completion cited by students in informal surveys have more genera lly to do with the cost already incurred and liable to be ''wasted'' t han the cost remaining to completion. This is further evidence of the so-called ''sunk cost effect.''