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.