The Effects of Goal Distance and Value in Escalation of Commitment

Abstract

Escalation of commitment describes individuals' tendencies to spend resources beyond the point of rationality in order to persist in a chosen course of action, and most believe that sunk cost is the primary cause. However, it has been noted that sunk costs are confounded with progress made toward a goal, and that sunk costs do not affect individuals' tendencies to escalate as all economic information is ignored in pursuit of the goal. Thus, the apparent escalation tendency may be a consequence of goal proximity instead of sunk costs. In Experiment 1, I show that individuals' tendencies to escalate reflect the goal-gradient effect after controlling for the sunk costs. Experiment 2 provides a psychological process model to explain why goal-gradient influences individuals' tendencies to escalate commitment by demonstrating that as individuals progress toward their goal, they exaggerate the value difference between the object that they are pursuing and the object that they are not pursuing. This perceived value difference, in turn, influences individuals' tendencies to commit escalation of commitment. Results suggest a new interpretation for escalation of commitment and new approaches to guiding people to avoid it.

Decision‐making heuristics and biases across the life span

“…Persistence in honoring sunk costs across repeated decisions—referred to as escalation of commitment 68 —has been the subject of considerable attention. Some laboratory studies use behavioral measures of the SCF and operationalize the sunk cost as a required behavioral investment of time, money, or effort 69–72 . More typically, behavioral measures of the SCF are obtained by using vignettes as stimuli to portray hypothetical investments.…”

“…Some laboratory studies use behavioral measures of the SCF and operationalize the sunk cost as a required behavioral investment of time, money, or effort. [69][70][71][72] More typically, behavioral measures of the SCF are obtained by using vignettes as stimuli to portray hypothetical investments. Hypothetical scenarios are used in both laboratory studies and survey research.…”

The Effect of Goal Difficulty on Escalation of Commitment

“…To date, there have been only a handful of empirical studies that have touched upon the relationship between goals and escalation (e.g., Conlon & Garland, ; Kernan & Lord, ; Lee, Keil, & Kasi, ; Ting, ), and they have drawn on two different theoretical perspectives, namely the goal‐gradient hypothesis (Hull, ) and control theory (Campion & Lord, ; Powers, ). The goal‐gradient hypothesis states that “the tendency to approach a goal increases with proximity to the goal” (Kivetz, Urminsky, & Zheng, , p. 39).…”

“…The goal‐gradient hypothesis states that “the tendency to approach a goal increases with proximity to the goal” (Kivetz, Urminsky, & Zheng, , p. 39). Drawing on the goal‐gradient hypothesis, Ting () found that a proximal goal leads to a greater tendency to escalate commitment than a distant goal. Further, the notion of goal proximity proposed by Conlon and Garland () can be viewed as a case of the goal‐gradient effect in which people expend more effort as they approach a goal.…”

Following Advice Because it's Been Paid For: Age, the Sunk-Cost Fallacy, and Loss Aversion

“…Although the two measures of the sunk-cost fallacy used in the present study differed in a number of ways, prior research has suggested that the sunk cost fallacy may be demonstrated across a variety of measures involving investments of time, money, effort, and adherence to advice (e.g., Cunha & Caldieraro, 2009;Friedman, Pommerenke, Lukose, Milam, & Huberman, 2007;Gino, 2008;Navarro & Fantino, 2009;Strough et al, 2011b;Ting, 2011). Thus, the positive relation between the behavioral measure involving real sunk costs and the self-report measure involving hypothetical sunk costs may be dependent in part on the number and types of scenarios included in the self-report measure.…”