The Influence of Compensation Method and Disclosure Level on Information Search Strategy and Escalation of Commitment

Abstract

In this study we examined the extent to which compensation method and public disclosure influenced information search strategy and escalation of commitment. A laboratory experiment involving 182 student subjects employed a 3 (compensation: no‐pay, salary, and contingent) by 2 (disclosure level: public and private) fully randomized, crossed design. Results show that in light of negative feedback concerning performance results of an investment portfolio, subjects whose initial allocation decisions were announced publicly reduced their search for prospective information, increased the search for retrospective information, and exhibited greater escalation of commitment than subjects who did not announce their initial investment strategy. The search for retrospective information and escalation of commitment was monotonically higher across the no‐pay, salary, and contingent pay conditions respectively, while the search for prospective information decreased correspondingly. This study provides evidence that escalation of commitment is positively related to the search for retrospective information and negatively related to the search for prospective information. The results obtained from this experiment complement and extend prior work in the areas of accountability, cognitive dissonance and escalation of commitment. © 1997 by John Wiley & Sons, Ltd.

Decision‐making heuristics and biases across the life span

“…The prior investment (sunk cost) portrayed in hypothetical scenarios is often money, 65 typically amounts many people do not deal with on a daily basis-such as thousands or millions of dollars. 77,[83][84][85][86][87][88] Researchers have begun to consider other investment dimensions such as time 72,76,78,82,89 and effort. 69,90 Measurement Some vignettes present a choice between two options embedded within a single scenario.…”

Public justification and investment in failing projects: the moderating effect of optimistic outcome expectations

“…Likewise, Kernan and Lord (1989) provided evidence for attention to supportive information. In the case of failing projects, findings suggested that public justification of allocation decisions can lead to unintended consequences such as selectively searching for information that supports the initial decision (Beeler & Hunton, 1997). This conclusion was supported by experiments, which indicate that the search for retrospective information (which supports the original decision) is higher when a failed allocation decision is made public than when it remains private (Beeler & Hunton, 1997).…”

“…In the case of failing projects, findings suggested that public justification of allocation decisions can lead to unintended consequences such as selectively searching for information that supports the initial decision (Beeler & Hunton, 1997). This conclusion was supported by experiments, which indicate that the search for retrospective information (which supports the original decision) is higher when a failed allocation decision is made public than when it remains private (Beeler & Hunton, 1997). Third, the literature on cognitive dissonance (Festinger, 1957) and forced compliance (Festinger & Carlsmith, 1959) has suggested that private opinion moves toward the position that is advocated by one's behavior or speech.…”

“…In the development of Hypothesis 1, three escalationinducing effects of public justification were discussed: (1) self-presentation concerns (Tetlock, 1985); (2) a decrease in the search for prospective information and an increase in the search for retrospective information (Beeler & Hunton, 1997); and (3) overconfidence as a result of trying to convince others (Bobocel & Meyer, 1994). Further, we argued that the three effects would have a lower impact on escalation when the decision maker is more optimistic about the project outcomes.…”

Competitive escalation and interventions

“…Several features of it, which might not necessarily be present in organizational settings, may have amplified the escalation or may limit the generalizability of findings: a large crowd of spectators (Beeler & Hunton, 1997), identifiability of and familiarity between players (Haran & Ritov, 2014), the outgoing and active atmosphere of the classroom game, and rules for possible increments in bid sizes.…”