“Sunk Cost Trap” in the Exhibition Economy and Exit Mechanism Design

Abstract

Against the background of the full implementation of the Fair Competition Review Regulations and the comprehensive withdrawal of disordered scale-oriented exhibition subsidies across China by the end of 2025, the long-hidden “sunk cost trap” problem in the exhibition economy has been fully exposed. A large number of exhibition projects that are not driven by real market demand but rely entirely on fiscal subsidies to maintain operation have accumulated high sunk investment in infrastructure, brand promotion and user invitation in the initial stage. Even when their operating losses have far exceeded the marginal benefit of continuing the project, local governments and market entities still fall into the cognitive bias of “cannot give up the input that has already been paid”, leading to continuous invalid capital investment, repeated waste of public resources, and intensified low-level homogeneous competition in the entire industry. Drawing on the mature empirical data of the two-year subsidy reduction pilot in Shanghai, Shenzhen and other regions, combined with the industrial operation logic of international top exhibition markets such as Germany, this study systematically sorts out the formation mechanism, operating performance and industrial negative effects of the sunk cost trap in China’s exhibition economy, constructs a multi-dimensional classified evaluation system for the sunk cost of exhibition projects that can be quantified, and proposes a phased, market-oriented exit mechanism framework that connects the pre-project review, mid-term dynamic warning and post-risk disposal. This study effectively integrates the verified practical experience of anti-involution governance and brand premium cultivation of China’s exhibition industry, which can help local governments avoid the long-term resource waste caused by blindly adhering to the sunk investment, and clear the market space for high-quality independent exhibition brands to develop, providing institutional support for China’s exhibition industry to achieve a benign transformation towards high-quality development.