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Related Experiment Videos

Escalation of commitment with transparent future outcomes.

Niklas Karlsson1, Tommy Gärling, Nicolao Bonini

  • 1Department of Psychology, Göteborg University, Sweden. Niklas.Karlsson@psy.gu.se

Experimental Psychology
|March 23, 2005
PubMed
Summary
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People often continue investing in failing projects due to sunk costs, even when aware it is irrational. This study shows escalation persists even with transparent information, suggesting non-economic factors drive this decision-making bias.

Area of Science:

  • Behavioral Economics
  • Decision Science
  • Psychology

Background:

  • Escalation of commitment, driven by sunk costs, is a common form of irrational decision-making.
  • Prior research suggested transparency in future outcomes and alternatives mitigates escalation.
  • However, the persistence of escalation even with full information remains incompletely understood.

Purpose of the Study:

  • To investigate whether escalation of commitment occurs even when individuals possess complete information about investment alternatives and future returns.
  • To explore the potential for non-economic factors to influence escalation behavior beyond purely rational economic considerations.

Main Methods:

  • An experiment was conducted using undergraduate students.
  • Participants were presented with fictitious investment scenarios involving sunk costs.

Related Experiment Videos

  • Full information regarding alternative investments and projected future returns was provided.

    • Main Results:

    • Escalation of commitment was observed despite the provision of complete information.
    • Participants demonstrated a tendency to continue investing in suboptimal courses of action.
    • This escalation occurred even when it was clear that further investment would not lead to economic improvement.

    Conclusions:

    • The tendency to escalate commitment is not solely dependent on a lack of information.
    • Non-economic motivations likely play a significant role in driving escalation behavior.
    • Further research is needed to identify and understand these noneconomic drivers for a comprehensive view of escalation.