A conceptualisation of task dimensions affecting escalation of commitment

People frequently continue an investment despite a negative outcome or sunk cost. Such irrational persistence in a losing course of action has been termed escalation of commitment. Although several explanations of escalation of commitment have been proposed, none of them accounts for all determinants that have been empirically demonstrated. Based on a review of previous research, a conceptualisation is introduced of how escalation of commitment is affected by 4 task dimensions: type and nontransparency of decision goal, nontransparency of sunk costs, time course of sunk costs, and accountability. A more inclusive theory that subsumes escalation of commitment is offered as an alternative that may be developed to account for the effects of the task dimensions.     

Weighing the past and the future in decision making

Prior irreversible investments of money, time, or effort referred to as sunk costs frequently lead to decisions to continue a chosen course of action despite that this is irrational. With the aim of demonstrating that such escalation of commitment is a special case of a more general phenomenon, two experiments were carried out employing undergraduates as participants. Experiment 1 showed for fictitious personal and business investment scenarios that both prior losses and gains (sunk outcomes) affected choices to continue or discontinue the investment. In Experiment 2 the effect of sunk outcomes was reduced although not eliminated by a monetary bonus that in one condition depended on the future outcomes of the second gamble in two-stage gambles, in another condition on the future returns in personal investment scenarios. In support of a more inclusive theory subsuming escalation of commitment, the decisions were affected by both past and future outcomes and both gains and losses.     

Workplace Expression of Emotions and Escalation of Commitment1

These studies examined the effects of expressions of anger and guilt in the workplace on escalation of commitment. Study 1 examined the relationship between employees' reports of coworkers' emotion expressions and continued investment in a poorly performing subordinate. Study 2 tested the effects of leader expressions of anger and guilt on continued investment in a failing project. Results of both studies demonstrate that expressions of anger lead to greater escalation of commitment, while expressions of guilt lead to de‐escalation. Experimental results indicate that the effects of emotion expressions on escalation are strongest when individuals are collectively responsible for the initial decision, a finding that was mediated by feelings of psychological safety.     

The Influence of Compensation Method and Disclosure Level on Information Search Strategy and Escalation of Commitment

In this study we examined the extent to which compensation method and public disclosure influenced information search strategy and escalation of commitment. A laboratory experiment involving 182 student subjects employed a 3 (compensation: no-pay, salary, and contingent) by 2 (disclosure level: public and private) fully randomized, crossed design. Results show that in light of negative feedback concerning performance results of an investment portfolio, subjects whose initial allocation decisions were announced publicly reduced their search for prospective information, increased the search for retrospective information, and exhibited greater escalation of commitment than subjects who did not announce their initial investment strategy. The search for retrospective information and escalation of commitment was monotonically higher across the no-pay, salary, and contingent pay conditions respectively, while the search for prospective information decreased correspondingly. This study provides evidence that escalation of commitment is positively related to the search for retrospective information and negatively related to the search for prospective information. The results obtained from this experiment complement and extend prior work in the areas of accountability, cognitive dissonance and escalation of commitment. © 1997 by John Wiley & Sons, Ltd.     

The Role of Individual Factors in Friendship Formation: Considering Shyness,Self‐Esteem,Social Skills,and Defensive Pessimism

The purpose of this study was to examine the effects of four individual factors (shyness, self‐esteem, social skills, and defensive pessimism) on the formation of friendships among undergraduate students. Freshmen (N = 93) completed a questionnaire assessing their shyness, self‐esteem, social skills, and level of defensive pessimism. Then, they answered questions about interpersonal indices (number of friends, satisfaction with friendships, their willingness to continue relationships, and their feelings of interpersonal friction). After 3 months, they completed a questionnaire about their anxiety state and behavior when talking with the people they had met since university admission. Moreover, they discussed the interpersonal indices they used in a pre‐questionnaire. Path analysis indicated that shyness directly leads to having fewer friends, whereas social skills lead to having more friends through extroversive behavior. Moreover, self‐esteem was positively related to an increase in the willingness to continue relationships, and reflection and pessimistic thinking (which is one component of defensive pessimism) led to a feeling of being fatigued from the effort of considering and respecting the reactions of others.     

Escalate shamefully,de‐escalate angrily or gratefully: The influence of discrete emotions on escalation of commitment

Decision makers often tend to escalate their commitment when faced with a dilemma of whether to continue a losing course of action. Researchers recently began to investigate the influence of discrete emotions on this decision tendency. However, this work has mainly focused on negative emotions and rarely considered positive emotions, to say nothing of comparing the effects of both of them simultaneously. The current study addresses this need by presenting the results of three experiments that examined the effects of four emotions of both positive and negative valences in escalation situations. Experiment 1 investigated the relationships of three trait emotions (hope, shame, and anger) and escalation of commitment. Experiments 2 and 3 examined the effects of three induced emotions (anger, shame, and gratitude) on escalation of commitment in a student sample and an employee sample, respectively. The results revealed that the effects of discrete emotions in escalation situations are mainly due to their associated differences on the appraisal dimension of responsibility that is related to escalation situations rather than their valence. The theoretical and practical implications are discussed.     

In Search of the Underlying Mechanism of the Disposition Effect

Using comprehensive data from the Finnish stock market, we assess the explanatory value of the three most commonly cited explanations for the disposition effect: prospect theory, belief in mean reversion, and escalation of commitment. In general, the results provide evidence for the presence of the disposition effect. More importantly, the effect appears to be significantly more pronounced when investors are personally responsible for the initial investment decision. This finding suggests that investor behavior is influenced above all by self‐justificatory concerns, an interpretation that is consistent with the escalation of commitment‐based explanation of the disposition effect. Copyright © 2011 John Wiley & Sons, Ltd.     

Bias in Performance Ratings: Clarifying the Role of Positive Versus Negative Escalation

This study replicated and refined research on the effects of escalation of commitment in performance ratings. We utilized experimental manipulations in a laboratory setting to determine whether positive escalation or negative escalation (or both) could be responsible for the effect. In one session, participants (N = 210) were assigned to the perspective of the potential employee's supervisor and chose 1 of 2 candidates for a sales position. In a second session, participants rated the performance of (a) the individual they selected; (b) the individual they rejected; or (c) a third individual, whose preselection information they never viewed. Results replicated previous findings, such that ratings were biased upward when participants rated the performance of the salesperson they had originally selected. Results were not biased downward when individuals rated the performance of the salesperson they had rejected, however. Thus, our results suggest that positive escalation, and not negative escalation, was the cause of the bias.     

Retroactive pessimism: a different kind of hindsight bias

In an attempt to regulate disappointments people may sometimes change their perceptions of the events leading to an undesirable outcome so that in retrospect this outcome seems almost inevitable. This retroactive pessimism effect was demonstrated in three studies. In the first, sports fans rated the likelihood of success for their team and its opponent before and after an important soccer match. Evidence for significant pre‐ and post‐game probability shifts was found for the fans of the defeated team but not for the supporters of the winning opponent. In the second and the third experiments participants responded to a scenario depicting a loss of stipend that was either large or small in value. Participants were expected to show more evidence of retroactive pessimism with greater disappointment. Indeed, estimates of the probability of a more favorable counterfactual outcome were sensitive to the magnitude of the loss with lower estimates of the probability that things could have turned out better in the large stipend condition. The effect was attenuated, however, when the loss was not personal but rather that of a friend (Experiment 2), or when the disappointment was mitigated (Experiment 3). Copyright © 2002 John Wiley & Sons, Ltd.     

Evolution, Traits, and the Stages of Human Courtship: Qualifying the Parental Investment Model

ABSTRACT Individual differences are explicitly connected to social interaction in Darwin's notion of sexual selection Traits that increase the probability of successful reproduction will tend to increase in frequency This process operates partly through differential choice, by one sex, of certain traits in the other According to the parental investment model, females frequently have more stringent criteria for the traits they will accept in a mate because they have a relatively larger investment in each offspring Because human mating arrangements often involve a substantial commitment of resources by the male, it is necessary to invoke a distinction between the selectivity involved during casual mating opportunities and the selectivity exercised when choosing a long-term partner Ninety-three undergraduate men and women rated their minimum criteria on 24 partner characteristics at four levels of commitment In line with an unqualified parental investment model, females were more selective overall, particularly on status-linked variables In line with a qualified parental investment model, males' trait preferences depended upon the anticipated investment in the relationship Males had lower requirements for a sexual partner than did females, but were nearly as selective as females when considenng requirements for a long-term partner     

Escalation of commitment with transparent future outcomes

A frequent case of irrational decision making is the tendency to escalate commitment to a chosen course of action after unsuccessful prior investments of money, effort, or time (sunk costs). In previous research it is argued that escalation does not occur when future outcomes and alternative investments are transparent. Inconsistent with this argument, in an experiment in which undergraduates were presented fictitious investment problems with sunk costs, escalation was demonstrated when full information was given about investment alternatives and estimates of future returns. Thus, it is indicated that people may escalate despite knowing that it will not make them economically better off. A more comprehensive understanding of escalation requires disentangling people's noneconomic reasons for escalation.     

Prospect Theory Predictions When Escalation Is Not the Only Chance to Recover Sunk Costs

Two experiments tested the effect of risk of alternative investment opportunities on decision behavior in an escalation context. In the first experiment (n = 170), the risk of the reinvestment option, which had been unsuccessful and incurred a sunk cost, was held equal to that of an alternative investment project. Responsibility for the previous decision was manipulated between these subjects. Subjects were required to choose between the reinvestment option and the alternative. Responsible subjects demonstrated classic reinvestment (escalation) tendencies, and nonresponsible subjects exhibited a significant tendency to avoid reinvestment. Subjects in the second experiment (n = 195) completed the same decision task and were also assigned to high and low responsibility conditions. In this experiment the risk of investing further in a previously chosen project, relative to the risk of the alternative project, was manipulated. Those subjects who were responsible for the first decision (a) demonstrated no preference for or against continued pursuit of the initial project (i.e., there was no escalation tendency) and (b) preferred the less risky of the second investments, regardless of whether it was or was not the initially chosen project. Nonresponsible subjects showed no risk preference or proclivity for reinvestment. The results of these experiments suggest that salient information concerning relative risk dominates the effect of prior performance information when alternative investments are considered. We discuss the implications of these findings for decision theory and for methodology in commitment escalation research.     

Impact of regulatory focus on ambiguity aversion

Although prior research has shown that some people prefer a risky to an ambiguous option, this study further proposes that people's regulatory focus (promotion vs. prevention) might influence their ambiguity aversion. Three experiments have tested whether people with promotion focus showed less ambiguity aversion than those with prevention focus: The first experiment revealed that, compared with chronically promotion‐focused individuals, prevention‐focused subjects preferred a risky to an ambiguous option. In the second experiment, priming of the subjects' goal orientations led to similar results. Experiment 3 demonstrated that participants showed less ambiguity aversion for the expected performance of an investment product representative of promotion (e.g., a stock fund) rather than one representative of prevention (e.g., a bond fund). In other words, people showed less preference for a bond fund when the probability distribution of its expected performance was unknown than when it was known, whereas they showed less preference difference between known and unknown probability distributions for the expected performance of a stock fund. This study has integrated research pertaining to regulatory focus and ambiguity aversion, and the results have confirmed that the impact of regulatory focus on ambiguity aversion is robust across different methods and decision tasks. Copyright © 2010 John Wiley & Sons, Ltd.     

Escalation and De-escalation of Commitment in Response to Sunk Costs: The Role of Budgeting in Mental Accounting

Research has traditionally assumed that people increase investment (or "escalate commitment") in response to previous investments (sunk costs). This paper presents several demonstrations which show that people will incorrectly de-escalate investment in response to sunk costs. I propose that people set mental budgets to control their resource expenditures: they set a budget for a class of expenses and track their investments against their budget. A lab study with real monetary incentives shows support for de-escalation and supports a specific rule for how people set budgets - based on the breakeven of total costs and total benefits. The budgeting process suggests that people are only likely to escalate commitment when they fail to set a budget or when expenses are difficult to track. The later part of the paper organizes the previous literature on escalation around these processes and provides additional experiments to illustrate each point. For example, I argue that previous demonstrations that have shown errors of escalation exclusively involve "incidental" investments that are difficult to track. A study in the current paper shows that people are more willing to invest time than money to salvage a monetary sunk cost and more willing to invest money than time to salvage a sunk cost of time, even when the time and money investments are of equal value. The paper concludes by discussing the rationality of escalation and de-escalation.     

The promise and peril of self-affirmation in de-escalation of commitment

Drawing on the motivated cognition literature, we examine how self-affirmation processes influence self-justification needs and escalation decisions. Study 1 found that individuals with a larger pool of affirmational resources (high self-esteem) reduced their escalation compared to those with fewer affirmational resources (low self-esteem). Study 2 extended these findings by demonstrating that individuals also de-escalated their commitments when they were provided an opportunity to affirm on an important value. Finally, Study 3 found that affirming on traits that were of low relevance (e.g., creativity) to an initial decision reduced escalation, but affirming on decision-relevant traits (e.g., decision-making ability) ironically increased escalation. Across three studies, using three instantiations of self-affirmations and two measures of escalation, the results highlight the potential benefits and costs of using self-affirmation as a vehicle to de-escalate commitment.     

Complaining about a compliment: Evaluating attributions of positive outcomes to discrimination

People evaluate stigmatized group members negatively when they attribute negative personal outcomes to discrimination, even when discrimination is the likely cause. The present studies examined whether similar interpersonal costs exist for attributing a positive personal outcome to discrimination in the context of positive stereotypes. In Study 1, 129 participants read an excerpt written by an Asian student who attributed an unexpectedly high essay grade to discrimination, writing quality, or easy grading. Participants evaluated the student least favourably when he attributed the positive outcome to discrimination. In Study 2, 140 participants evaluated a successful Asian job applicant less favourably than a successful, white applicant, although both applicants attributed the positive outcome to group membership. The implications for how stigmatized group members perceive and respond to prejudice and discrimination are discussed.     

Biased information processing in the escalation paradigm: information search and information evaluation as potential mediators of escalating commitment

Escalation of commitment denotes decision makers' increased reinvestment of resources in a losing course of action. Despite the relevance of this topic, little is known about how information is processed in escalation situations, that is, whether decision makers who receive negative outcome feedback on their initial decision search for and/or process information biasedly and whether these biases contribute to escalating commitment. Contrary to a widely cited study by E. J. Conlon and J. M. Parks (1987), in 3 experiments, the authors found that biases do not occur on the level of information search. Neither in a direct replication and extension of the original study with largely increased test power (Experiment 1) nor under methodologically improved conditions (Experiments 2 and 3) did decision makers responsible for failure differ from nonresponsible decision makers with regards to information search, and no selective search for information supporting the initial decision or voting for further reinvestment was observed. However, Experiments 3 and 4 show that the evaluation of the previously sought information is biased among participants who were responsible for initiating the course of action. Mediation analyses show that this evaluation bias in favor of reinvestment partially mediated the responsibility effect on escalation of commitment.     

When success breeds failure: history,hysteresis, and delayed exit decisions

The effects of feedback equivocality, information availability, and prior decision-making history on escalation and persistence were investigated. Replicating the findings of J.L. Bragger, D.H. Bragger, D.A. Hantula, and J.P. Kirnan (1998), this study found that participants receiving equivocal feedback on their decisions invested more money and invested across more opportunities; those who could purchase information invested fewer resources than did participants who did not have the opportunity to purchase information. There was an inverse linear relationship between the percentage of opportunities in which participants purchased information and the delay to exit decisions and total resources invested. Six weeks earlier, some participants took part in a more profitable investment scenario, and prior experience led to later increased investing when participants were faced with failure, even above that invested in a preceding, succeeding scenario. These results are consistent with an equivocality theory account of escalation.     

The effects of mortality salience on escalation of commitment

Based on propositions derived from terror management theory (TMT), the current study proposes that people who are reminded of their mortality exhibit a higher degree of self-justification behavior to maintain their self-esteem. For this reason, they could be expected to stick with their previous decisions and invest an increasing amount of resources in those decisions, despite the fact that negative feedback has clearly indicated that they might be on a course toward failure (i.e., "escalation of commitment"). Our experiment showed that people who were reminded of their mortality were more likely to escalate their level of commitment by maintaining their current course of action. Two imaginary scenarios were tested. One of the scenarios involved deciding whether to send additional troops into the battlefield when previous attempts had failed; the other involved deciding whether to continue developing an anti-radar fighter plane when the enemy had already developed a device to detect it. The results supported our hypothesis that mortality salience increases the tendency to escalate one's level of commitment.