Abstract
Purpose
The purpose of this study was to examine the hypothesis that decision difficulty increases the likelihood of commitment to a failing project (escalation). The hypothesis was based on findings regarding status quo bias. Three aspects of decision difficulty were tested: equivalence of options, option set size and attractiveness structure of the alternatives.
Design/Methodology/Approach
Escalation of commitment was examined through monetary investments and time and energy investments. In each case, the three aspects of decision difficulty were manipulated using scenarios. Participants were 340 students, each responding to one scenario.
Findings
Participants increased their commitment to the original failing project when deciding between reinvestment of the remaining funds in the original project or choosing between superior but equally attractive alternatives (i.e., equivalence of options). This was true when the attractiveness attributes of the available options was uniquely negative, as opposed to uniquely positive (i.e., attractiveness structure). The number of alternative options (i.e., set size) did not affect escalation behavior.
Implications
The findings support the view that escalation decisions may be viewed as status quo maintenance. They indicate that even if preserving the status quo is highly risky, when decision difficulty is high, people are more likely to hazard the risk. Persisting in the original project allows the investor to avoid negative emotions, additional effort and conflict.
Originality/Value
This is one of the first studies combining status quo bias, escalation of commitment and decision difficulty. The study is unique in studying two different types of investment and three different aspects of decision difficulty.
Similar content being viewed by others
References
Anderson, C. J. (2003). The psychology of doing nothing: Forms of decision avoidance result from reason and emotion. Psychological Bulletin, 129, 139–167.
Arkes, H. R., & Blumer, C. (1985). The psychology of sunk-cost. Organizational Behavior and Human Decision Processes, 35, 124–140.
Botti, S., & Iyengar, S. S. (2004). The psychological pleasure and pain of choosing: When people prefer choosing at the cost of subsequent outcome satisfaction. Journal of Personality and Social Psychology, 87, 312–326.
Brockner, J. (1992). The escalation of commitment to a failing course of action: Toward theoretical progress. The Academy of Management Review, 17, 39–61.
Dhar, R. (1996). The effect of decision strategy on the decision to defer choice. Journal of Behavioral Decision Making, 9, 26–281.
Dhar, R. (1997a). Consumer preference for a no-choice option. Journal of Consumer Research, 24, 215–231.
Dhar, R. (1997b). Context and task effects on choice deferral. Marketing Letter, 8, 119–130.
Dhar, R., & Nowlis, S. M. (1999). The effect of time pressure on consumer choice deferral. Journal of Consumer Research, 25, 369–384.
Dhar, R., Nowlis, S. M., & Sherman, S. J. (1999). Comparison effects on preference construction. Journal of Consumer Research, 26, 293–306.
Dhar, R., & Simonson, I. (1999). Choice deferral. In P. Earl & S. Kemp (Eds.), The Elgar companion to consumer research and economic psychology (pp. 75–81). New York: Elgar.
Fox, S., & Hoffman, M. (2002). Escalation behavior as a specific case of goal-directed activity: A persistence paradigm. Basic and Applied Social Psychology, 24, 273–285.
Frank, R. H. (1994). Microeconomics and behavior. New York: McGraw Hill.
Houston, D. A., & Sherman, S. J. (1995). Cancellation and focus: The role of shared and unique features in the choice process. Journal of Experimental Social Psychology, 31, 357–378.
Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47, 263–291.
Karlsson, N., Gärling, T., & Bonini, N. (2005). Escalation of commitment with transparent future outcomes. Experimental Psychology, 52, 67–73.
Luce, M. F. (1998). Choosing to avoid: Coping to avoid negatively emotion—laden consumer decision. Journal of Consumer Research, 24, 409–433.
Luce, M. F., Bettman, J. R., & Payne, J. W. (1997). Choice processing in emotionally difficult decisions. Journal of Experimental Psychology: Learning, Memory, and Cognition, 23, 384–405.
Luce, M. F., Payne, J. W., & Bettman, J. R. (2001). Emotional decisions: Tradeoff difficulty and coping in consumer choice. Journal of Consumer Research—Monograph, 1, 1–168.
McCain, B. E. (1986). Continuing investment under conditions of failure: A laboratory study of the limits of escalation. Journal of Applied Psychology, 71, 280–284.
Redelmeier, D. A., & Shafir, E. (1995). Medical decision making in situations that offer multiple alternatives. Journal of the American Medical Association, 273, 302–305.
Schaubroeck, J., & Davis, E. (1994). Prospect theory predictions when escalation is not the only chance to recover sunk costs. Organizational Behavior and Human Decision Processes, 57, 59–82.
Sethi-Iyengar, S., Huberman, G., & Jiang, W. (2004). How much choice is too much contributions to 401(k) retirement plans. In O. S. Mitchell & S. Utkus (Eds.), Pension design and structure: New lessons from behavioral finance (pp. 83–95). Oxford: Oxford University Press.
Staw, B. M., & Ross, J. (1987). Behavior in escalation situations: Antecedents, prototypes, and solutions. Research in Organizational Behavior, 9, 39–78.
Tversky, A., & Shafir, E. (1992). Choice under conflict: The dynamics of deferred decisions. Psychological Science, 3, 358–361.
Whyte, G. (1986). Escalating commitment to a course of action: A reinterpretation. Academy of Management Review, 11, 311–321.
Author information
Authors and Affiliations
Corresponding author
Additional information
Received and reviewed by former editor, George Neuman.
Rights and permissions
About this article
Cite this article
Fox, S., Bizman, A. & Huberman, O. Escalation of Commitment: The Effect of Number and Attractiveness of Available Investment Alternatives. J Bus Psychol 24, 431–439 (2009). https://doi.org/10.1007/s10869-009-9124-2
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10869-009-9124-2