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.