In the Late 1970s,the Premier of British Columbia Announced That

Essay

In the late 1970s,the Premier of British Columbia announced that the province would host a transportation exhibition in 1986 with a modest budget of only $78 million.On at least two occasions,administrators recommended cancelling the exposition due to cost overruns and labour troubles,but the government decided to continue with the project.But by the end of Expo 86,the budget exceeded $1.5 billion with a deficit of $300 million.Using your knowledge of escalation of commitment,discuss how self-justification and prospect theory effect help explain why the government might have been motivated to continue with the project.B.M.Staw,'Expo 86: An Escalation Prototype',Administrative Science Quarterly,31,1986,pp.379-91).Students may identify any three of the four causes of escalation described in the textbook and highlighted below.
Self-justification.Cancelling Expo 86 would have suggested that the Premier of British Columbia (who originally proposed the fair)made a bad decision,whereas continuing the fair would be a vote of confidence towards his leadership ability.The Premier also may have continued the project because he had repeatedly emphasized the value of the project and to reverse this position would convey an image of inconsistent leadership.Finally,the Premier's decision was face-saving for the entire province because cancellation would jeopardize British Columbia's image as a place where challenges are accomplished rather than abandoned.
Prospect theory effect.People have more aversion to losses than to gains,and they are more willing to risk taking losses than receiving gains.Thus,the Premier may have poured more money in because it would be more painful to stop the project.In other words,they may have had inflated expectations of their ability to overcome problems that faced the project.
Difficulty: Medium
Learning Objective: 07-03 Discuss the roles of emotions and intuition in decision making.
McShane - Chapter 07 #165
Topic: 07-18 Escalation of Commitment