Escalation of Commitment

Self-justification theory.

Self-justification theory provides one explanation for why people escalate commitment to their past investments. Feeling personally responsible for an investment that turns sour intensifies the threat associated with failure and increases a decision maker’s motivation to justify the original choice to herself. Negative feedback on a past investment decision calls the validity of the original decision into question and is dissonant with a decision maker’s natural desire to see herself as competent. Many decision makers attempt to eliminate this conflict by convincing themselves that their failing ventures will turn around if they simply invest more resources. To do so and succeed would prove that the original choice was valid and eliminate the “cognitive dissonance” created by the initial negative feedback.

Confirmation bias.

Biased information processing is one way that decision makers reduce the dissonance that arises when their positive self-perceptions conflict with evidence that past investments are under-performing. After committing to a choice, people are far more likely to notice and overweight evidence that supports their decision and ignore and underweight evidence that does not. Furthermore, decision makers actively seek information that confirms the validity of their decisions. This means that decision makers may actually be less aware of problems with their current investments, or, when they are aware of such problems, they may underestimate their severity. “Confirmation bias” can therefore cause decision makers to escalate commitment to bad investments.

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