Title

The Role of Information Asymmetry in Escalation Phenomena: Empirical Evidence

Document Type

Article

Publication Date

2-2009

Abstract

Economic rationality dictates that only incremental costs and benefits should affect decisions. Observed behavior often seems to violate this principle, resulting in unwarranted commitment to past choices and their escalation. In this paper, we present experimental results that show that information asymmetry plays a key role in determining when such escalation behavior occurs. This finding opens new avenues for mitigating escalation behavior since information asymmetry is an environmental feature that can be modified by organization design and explicit economic rewards.

Comments

This article was originally published in Journal of Economic Behavior & Organization, volume 69, in 2009.

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Peer Reviewed

1

Copyright

Elsevier