Deck 7: The Escalation of Commitment

Question 1

Why is it so hard for managers to internalize the sunk-cost concept when making decisions?

Answer 1

it is hard to recognize the reasons for including sunk costs in our calculations in the first place.

Question 2

In a competitive auction,continuing to bid after both one and one's competitors have started bidding is considered irrational escalation of commitment.

Answer 2

False

Question 3

When deciding whether or not to escalate commitment to a chosen course of action,our choice should depend on:

A)The expected value of further investment.
B)Our sunk costs.
C)Our initial reasons for choosing that course of action.
D)None of the above.

Answer 3

A

Question 4

How can an organization change its reward scheme to discourage the preference of impression management over high-quality decision making?

Question 5

Explain the paradox that a manager faces,when choosing between changing course of action and escalating commitment to it.

Question 6

Which of the following best describes nonrational escalation of commitment?

A)Strong commitment to an idea that was previously chosen.
B)Commitment to a previous course of action beyond the point prescribed by rational models of decision making.
C)Continuing with a previously chosen course of action when the potential future benefits outweigh the potential future costs.
D)Commitment to a previously chosen course of action when the expected value of continuing the project is positive.

Question 7

The confirmation trap is a primary underlying bias of escalation of commitment.

Question 8

What are the reasons for the difference between groups and individuals in the likelihood of escalating commitment and in the degree to which commitment is escalated?

Question 9

When choosing whether or not to continue pursuing a selected course of action,previous commitments and spent resources should be regarded as ____________ .

Question 10

Which of the following is an underlying mechanism of escalation of commitment?

A)The confirmation trap.
B)Competitive irrationality.
C)Evaluating potential consequences from different reference points.
D)Self-justification.

Question 11

Specific actions of parties engaged in competitive irrationality are:

A)More likely to occur as their commitment escalates.
B)Irrational to the extent that the initial commitment is irrational.
C)Not easily identified as irrational.
D)Rational by definition.

Question 12

Groups are _________ likely than individuals to escalate commitment; group escalation of commitment is likely to be ____________ extreme than individual escalation of commitment.

Question 13

Which of the following is not likely to produce escalation of commitment?

A)A present state that is below expectations.
B)A present decision that is likely to generate further losses.
C)A present decision that is a result of a previous decision.
D)Past investment of a great deal of resources in a selected course of action.

Question 14

Explain how George Bush's presidential campaign in 2004 benefited from his escalation of commitment to unpopular stances on various issues,including the war in Iraq.

Question 15

A department manager has personally decided to hire a new employee.This employee's performance,however,proves to be below expectations.Nevertheless,the manager decides to keep the employee,explaining away his current performance as merely part of the learning process.This escalation of commitment may be due to:

A)Perceptual biases.
B)Judgmental biases.
C)Impression management.
D)All of the above

Question 16

Which is not a good mechanism for protecting oneself from irrational escalation of commitment?

A)Separating initial decisions from future decisions.
B)Rotating decision makers between various stages of the process,so that the person who chose the initial course of action will not be the one choosing whether or not to continue pursuing it.
C)Identify reasons for justifying the initial course of action,in order to avoid the creation of cognitive dissonance,which ultimately leads to irrational escalation of commitment.
D)Consider the decision from the perspective of one's competitors.

Question 17

Escalation of commitment is more pronounced in simultaneous decisions than in serial decisions.

Question 18

Which of the following is a useful advice for a competing party that wishes to avoid competitive escalation of commitment?

A)Pursue mutual disclosure of intentions between you and your competitor.
B)Make an initial high bid that will discourage the competitor from entering the auction.
C)Do not focus too much on the competitor's needs and interests,but on your own.
D)Know the expected bidding patterns of your competitor in advance.

Question 19

Any loss from an initial investment will systematically encourage an individual to continue the previously selected course of action,due to the human tendency to be risk-_________ in negatively framed problems.

Question 20

The tendency to escalate commitment is more pronounced when:

A)The commitment is to a failed decision made by oneself.
B)The failure of the initial commitment can be explained with a causal,unrelated account.
C)The escalation is made by an individual,compared with escalation made by a group.
D)All of the above.