Abstract
Economic rationality dictates that only incremental costs and benefits should affect decisions. Observed behavior often seems to violate this principle, resulting in unwarranted commitment to past choices and their escalation. In this paper, we present experimental results that show that information asymmetry plays a key role in determining when such escalation behavior occurs. This finding opens new avenues for mitigating escalation behavior since information asymmetry is an environmental feature that can be modified by organization design and explicit economic rewards.
Original language | English (US) |
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Pages (from-to) | 135-147 |
Number of pages | 13 |
Journal | Journal of Economic Behavior and Organization |
Volume | 69 |
Issue number | 2 |
DOIs | |
State | Published - Feb 2009 |
Keywords
- Escalation of commitment
- Reputation
- Sunk costs