Do we really need to change the decision maker? Counterintuitive escalation of commitment results in real options contexts


Journal Article

© 2016 INFORMS. A robust finding in the escalation literature, termed as the preference e ect, is that involvement in the period 1 initial project assessment decision increases the tendency for decision makers to stick with a losing course of action during the period 2 project reassessment decision. The proposed solution is to bring in a new decision maker in period 2. Across multiple studies, we show that providing period 1 information in real options format increases the tendency for decision makers to view period 2 focal event information as both more negative and more important. Consequently, such decision makers exhibit less escalation in period 2, i.e., exhibit behavior opposite to the preference e ect. This suggests that, in real option contexts, not only do we not need to bring in a new decision maker, but also (counterintuitively) it is beneficial to retain the same decision maker in situations where escalation is likely to occur.

Full Text

Duke Authors

Cited Authors

  • Boulding, W; Guha, A; Staelin, R

Published Date

  • October 1, 2017

Published In

Volume / Issue

  • 63 / 10

Start / End Page

  • 3459 - 3472

Electronic International Standard Serial Number (EISSN)

  • 1526-5501

International Standard Serial Number (ISSN)

  • 0025-1909

Digital Object Identifier (DOI)

  • 10.1287/mnsc.2016.2475

Citation Source

  • Scopus