User:MackenzieD16/sandbox
Escalation of commitment
[edit]From Wikipedia, the free encyclopedia
Escalation of commitment was first described by Barry M. Staw in his 1976 paper, "Knee deep in the big muddy: A study of escalating commitment to a chosen course of action".[1]
The term sunk cost fallacy has been used by financiers and behavioral scientists to describe the phenomenon where people justify increased investment in a decision, based on the cumulative prior investment, despite new evidence suggesting that the cost, starting today, of continuing the decision outweighs the expected benefit. Such investment may include money, time, or even — in the case of military strategy — human lives. The phenomenon and the sentiment underlying it are reflected in such proverbial images as "Throwing good money after bad", "In for a dime, in for a dollar", or "In for a penny, in for a pound". The term is also used to describe poor decision-making in business, politics, and gambling.
Additionally, "irrational escalation" (sometimes referred to as "irrational escalation of commitment" or "commitment bias") is a term frequently used in psychology and sociology to refer to a situation in which people can make irrational decisions based upon rational decisions in the past or to justify actions already taken. Examples are frequently seen when parties engage in a bidding war; the bidders can end up paying much more than the object is worth to justify the initial expenses associated with bidding (such as research), as well as part of a competitive instinct.
Contents
[edit][hide]
- 1 Four main determinants
- 2 Examples
- 3 See also
- 4 References
Four main determinants[edit source | edit]
[edit]The main drivers of the tendency to invest in losing propositions are:[2][not in citation given]
- Social (peer pressure)
- Psychological (gambling)
- Project (past commitments)
- Structural (cultural and environmental factors)
Recent research shows that the tendency to escalate commitment is highest at the initial and terminal stages of a project, compared to the intermediate state of project completion [3]
Examples[edit source | edit]
[edit]- The dollar auction is a thought exercise demonstrating the concept.
- After a heated and aggressive bidding war, Robert Campeau ended up buying Bloomingdale's for an estimated $600 million more than it was worth. The Wall Street Journal noted that "we're not dealing in price anymore but egos." Campeau was forced to declare bankruptcy soon afterwards.[4]
- The term has been used to describe the United States commitment to military conflicts including Vietnam in the 1960s - 1970s and in Iraq in the 2000s, where sunk costs in terms of dollars spent and lives lost were taken as justifying continued involvement.[5]
- Certain fraud schemes exploit this behaviour, such as the Nigerian 419 Scam, where victims continue to spend money for alleged business deals, although the fraudulent character of the deal appears obvious to uninvolved persons.[6]
See also[edit source | edit]
[edit]- Sunk cost
- List of cognitive biases
- Lock-in (decision-making)
- Progress trap
- Zero-profit condition
References[edit source | edit]
[edit]- Jump up^ Barry M. Staw: "Knee-deep in the Big Muddy: A Study of Escalating Commitment to a Chosen Course of Action". Organizational Behavior and Human Performance 16(1):27-44.
- Jump up^
- Jump up^ He, Xin and Mittal, Vikas, The Effect of Decision Risk and Project Stage on Escalation of Commitment (March 1, 2007). ScienceDirect, Organizational Behavior and Human Decision Processes 103 (2007) 225–237. Available at SSRN: http://ssrn.com/abstract=2630334
- Jump up^ Max H. Bazerman: Negotiating Rationally January 1, 1994 (ISBN 0-02-901986-9).
- Jump up^ Barry Schwartz, The Sunk-Cost Fallacy, Bush Falls Victim to a Bad New Argument for the Iraq War, Slate.com, Sept. 9, 2005, retrieved 6-11-08
- Jump up^ Hoax Slayer, Advance Fee Scams - Nigerian Scams - 419 Scam Information, retrieved 5-1-2015
- Sleesman, D. J., Conlon, D. E., McNamara, G., & Miles, J. E. (2012). Cleaning up the big muddy: A meta-analytic review of the determinants of escalation of commitment. Academy of management Journal, 55(3), 541-562.
|
![]() | This is a user sandbox of MackenzieD16. A user sandbox is a subpage of the user's user page. It serves as a testing spot and page development space for the user and is not an encyclopedia article. |