DP9862 Tuition fees as a commitment device

Author(s): Nadine Ketel, Jona Linde, Hessel Oosterbeek, Bas van der Klaauw
Publication Date: March 2014
Keyword(s): Field experiment, Higher education, Sunk-cost effect
JEL(s): C93, D03, I22
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=9862

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 receive larger discounts will attend fewer tutorial sessions. For the full sample, we find little support for this hypothesis, but we find a significant effect of sunk costs on attendance for the 45% of students in our sample who are categorized as sunk-cost prone based on hypothetical survey questions. For them higher tuition fees can serve as a commitment device to attend classes.