Escalation of commitment: The effect of number and attractiveness of available investment alternatives

Purpose The purpose of this study was to examine the hypothesis that decision difficulty increases the likelihood of commitment to a failing project (escalation). The hypothesis was based on findings regarding status quo bias. Three aspects of decision difficulty were tested: equivalence of options, option set size and attractiveness structure of the alternatives. Design/Methodology/Approach Escalation of commitment was examined through monetary investments and time and energy investments. In each case, the three aspects of decision difficulty were manipulated using scenarios. Participants were 340 students, each responding to one scenario. Findings Participants increased their commitment to the original failing project when deciding between reinvestment of the remaining funds in the original project or choosing between superior but equally attractive alternatives (i.e., equivalence of options). This was true when the attractiveness attributes of the available options was uniquely negative, as opposed to uniquely positive (i.e., attractiveness structure). The number of alternative options (i.e., set size) did not affect escalation behavior. Implications The findings support the view that escalation decisions may be viewed as status quo maintenance. They indicate that even if preserving the status quo is highly risky, when decision difficulty is high, people are more likely to hazard the risk. Persisting in the original project allows the investor to avoid negative emotions, additional effort and conflict. Originality/Value This is one of the first studies combining status quo bias, escalation of commitment and decision difficulty. The study is unique in studying two different types of investment and three different aspects of decision difficulty.