Perceived "fairness" of groups and organizations: A human foraging rule?

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Conference Proceeding

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Escalation of commitment and the sunk cost effect have often been erroneously used interchangeably. Escalation is when decision makers “irrationally” recommit resources to a failing course of action, while the sunk cost effect is a maladaptive economic behavior that is manifested in a greater tendency to continue with a project once an investment has been made. From an economic standpoint, future prospects should guide rational decision making; going one step further, it is irrational to consider prior costs in current prospects. In stark contrast to the traditional economic perspective, the behavior analytic perspective suggests that prior events properly set the stage for decision making. Previous research in behavior analysis and economics implicates equivocality (intermittent reinforcement) as a primary cause of escalation. Sunk cost and equivocality have been studied separately, but have yet to be studied simultaneously in an experiment. Analyzing the interaction of sunk cost and equivocality in investment decisions, we find that sunk cost effects exert influence on decision making early on, but continued escalation in a failing venture is due to feedback equivocality. Implications for executive decision making in risky and uncertain ventures are discussed.

Publication Title

35th Annual Association for Behavior Analysis International Convention