The Econometrics and Behavioral Economics of Escalation of Commitment: A Re-examination of Staw and Hoang's NBA Data

Colin Camerer () and Roberto Weber

No 1043, Working Papers from California Institute of Technology, Division of the Humanities and Social Sciences

Abstract: We examine the phenomenon of escalation from an economist's perspective, emphasizing explanations which do not rule out rational behavior on the part of firms or agents. We argue that escalation cannot be established as a separate phenomenon unless these possible alternative explanations are properly accounted for. We present Staw and Hoang's (1995) study of NBA data as an instance of where evidence of escalation might be overturned upon more careful analysis. After performing several tests of our alternative explanations, we find that evidence of escalation persists, although it is weaker both in duration and magnitude.

Keywords: Escalation; Sunk cost fallacy; Behavioral economics (search for similar items in EconPapers)
Pages: 25 pages
Date: 1998-08
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Published: Journal of Economic Behavior and Organization , 1999

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Journal Article: The econometrics and behavioral economics of escalation of commitment: a re-examination of Staw and Hoang's NBA data (1999)
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