Full Program »
“Please escalate your commitment to my project”: Do managers strategically use the sunk-cost effect as an influence tactic?
While much is known about forces that shape organizational decisions, it is largely unknown whether managers leverage such forces to influence others. For example, individuals often pursue an inferior course of action simply because resources have previously been invested in it, a phenomenon called the “sunk-cost fallacy” or “escalation of commitment.” Do managers understand and strategically use the sunk-cost effect to influence others’ commitment levels? In experiments, managers were randomly assigned a goal – to escalate or deescalate others’ commitments – and then decided whether to highlight or hide sunk costs. Managers used sunk-cost effects “optimally” ~58-59% of the time: this is significantly above chance (50%), yet it suggests that only ~16-18% of managers systematically use sunk-cost effects. Managers seemed to anticipate some mechanisms underlying sunk-cost effects (self-presentation theory, self-justification theory), but not others (prospect theory); most surprisingly, managers’ predictions revealed that they do not believe in the sunk-cost effect on average.