[1] Economists and behavioral scientists use a related term, sunk-cost fallacy, to describe the justification of increased investment of money or effort in a decision, based on the cumulative prior investment ("sunk cost") despite new evidence suggesting that the future cost of continuing the behavior outweighs the expected benefit.
The phenomenon and the sentiment underlying them are reflected in such proverbial images as "throwing good money after bad", or "In for a penny, in for a pound", or "It's never the wrong time to make the right decision", or "If you find yourself in a hole, stop digging."
[2] Researchers, inspired by the work of Staw, conducted studies that tested factors, situations and causes of escalation of commitment.
"According to such a viewpoint, decision makers assess the probability that additional resource allocations will lead to goal attainment, as well as the value of goal attainment (i.e., rewards minus costs), and thereby generate a subjective expected utility associated with the decision to allocate additional resources.
This research explains the factors that influence whether escalation or deescalation of commitment is more likely to occur through the role of budgeting and mental accounting.
One of the first examples of escalation of commitment was described by George Ball, who wrote to President Lyndon Johnson to explain to him the predictions of the war outcome:[1] The decision you face now is crucial.
Once large numbers of U.S. troops are committed to direct combat, they will begin to take heavy casualties in a war they are ill equipped to fight in a noncooperative if not downright hostile countryside.
Managers tend to recall and follow information that is aligned to their behavior to create consistency for their current and future decisions.
If a group member or outside party recognizes inconsistent decision making, this can alter the leadership role of the manager.
[citation needed] Prospect theory helps to describe the natural reactions and processes involved in making a decision in a risk-taking situation.
Prospect theory makes the argument for how levels of wealth, whether that is people, money, or time, affect how a decision is made.
[4] The framing to how the problem is introduced is crucial for understanding and thinking of the probability that the situation will either work in favor or against you and how to prepare for those changes.
"Whyte (1986) argued that prospect theory provides the psychological mechanism by which to explain escalating commitment to a failing course of action without the need to invoke self-justification processes.
(Fiegenbaum & Thomas, 1988: 99)"[4] Prospect theorists believe that one's use of this process is when there is a negative downfall in the stakes that will affect the outcome of the project.
Although this theory seems realistic, researchers "Davis and Bobko (1986) found no effect of personal responsibility on continued commitment to the previous course of action in the positive frame condition.
The attribution theory, originating from Fritz Heider, "attempts to find causal explanations for events and human behaviors."
[citation needed] Locus of causality reflects on internal characteristics of an individual, such as intelligence levels and attention seeking, with the relationship of the external space such as weather forecasts and task difficulty.
"[1] The model is general and can provide an ideal view as to how the effects whether positive or negative are defined by micro and macro forces.
[10] Of these, sunk costs, time investment, decision maker experience and expertise, self-efficacy and confidence, personal responsibility for the initial decision, ego threat, and proximity to project completion have been found to have positive relationships with escalation of commitment, while anticipated regret and positive information framing have been found to have negative relationships.
This was illustrated in a case study by Staw, where providing business students with manipulated responsibilities for initial decisions and their outcomes resulted in the greatest commitment to increased actions and resources when the initial decision assigned was made directly by the student with poor outcomes.
Individuals and groups that are directly employed due to a project, have financial stake in it may provide enough opposition to prevent changes from being made as well.
[13] Members can eliminate some of the escalation potential if they come to a better decision earlier on in the process and avoid the need to change course dramatically.
In this case, groupthink assists in keeping with the original decision and pressures towards conformity rather than dividing the group with other options.
Also, a group whose members are not cohesive can have decreased escalation potential due to conflicts and varying levels of inclusion in the process.