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Escalation Bias: Does It Extend to Marketing?

Author

Listed:
  • JS Armstrong

    (The Wharton School)

  • Nicole Coviello

    (University of Auckland)

  • Barbara Safranek

    (S. G. Warburg & Co.)

Abstract

Escalation bias implies that managers favor reinvestments in projects that are doing poorly over those doing well. We tested this implication in a marketing context by conducting experiments on advertising and product-design decisions. Each situation was varied to reflect either a long-term or a short-term decision. Besides these four conditions, we conducted three replications. We found little evidence of escalation bias by 365 subjects in the seven experimental comparisons.

Suggested Citation

  • JS Armstrong & Nicole Coviello & Barbara Safranek, 2005. "Escalation Bias: Does It Extend to Marketing?," General Economics and Teaching 0502036, EconWPA.
  • Handle: RePEc:wpa:wuwpgt:0502036
    Note: Type of Document - pdf; pages: 11
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    References listed on IDEAS

    as
    1. Garland, Howard & Newport, Stephanie, 1991. "Effects of absolute and relative sunk costs on the decision to persist with a course of action," Organizational Behavior and Human Decision Processes, Elsevier, vol. 48(1), pages 55-69, February.
    2. Burnett, John J. & Dune, Patrick M., 1986. "An appraisal of the use of student subjects in marketing research," Journal of Business Research, Elsevier, vol. 14(4), pages 329-343, August.
    3. Arkes, Hal R. & Blumer, Catherine, 1985. "The psychology of sunk cost," Organizational Behavior and Human Decision Processes, Elsevier, vol. 35(1), pages 124-140, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    escalation bias; marketing;

    JEL classification:

    • A - General Economics and Teaching

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