ABSTRACT
This chapter discusses behavioral traps or situations where people become engaged in a rational course of actions which later become undesirable. Sunk costs are a trap because it is difficult to ignore the temptation to spend more money on a losing project to try to improve the outcome. Because of the sunk cost effect, people often elect to spend more money when the better response would be to walk away. The Constellation Program is a human spaceflight program that was designed to replace the Space Shuttle and send astronauts to the Moon and possibly to Mars as well. The longer the project continued, the more difficult it became to escape from the sunk cost trap. Automakers produced so many cars that most sat in the car lots for up to six months and required substantial cuts in prices before they were actually sold. This is called the prudence trap. The prudence trap can lead to cascading effects with disastrous consequences.
