Hire Someone to Blame: Degree of Involvement in Decisions and the Likelihood that Professionals Will Stop Investing after Experiencing Losses

31 Pages Posted: 26 Jul 2021

See all articles by Steve Heinke

Steve Heinke

University of Basel

Kevin Trutmann

Faculty of Psychology, University of Basel

Celine Rudin

University of Basel

Date Written: July 23, 2021

Abstract

The likelihood of stopping an investment project differs after an experienced gain or loss. We investigate how the degree of involvement in prior decisions affects the subsequent decision to change an investment. To this end we conduct a lab-in-the-field experiment with professional participants from the finance department of a large infrastructure company. In line with the hypothesis and prior findings from student samples we find that lower involvement in the decision is associated with a higher likelihood of changing the investment project after a loss. However, this difference disappears with age and thus seniority in the professional career.

Keywords: sequential risk taking, professionals, escalation of commitment, sunk cost fallacy, under-commitment to investment

JEL Classification: C91, D81, D91

Suggested Citation

Heinke, Steve and Trutmann, Kevin and Rudin, Celine, Hire Someone to Blame: Degree of Involvement in Decisions and the Likelihood that Professionals Will Stop Investing after Experiencing Losses (July 23, 2021). Available at SSRN: https://ssrn.com/abstract=3892106 or http://dx.doi.org/10.2139/ssrn.3892106

Steve Heinke (Contact Author)

University of Basel ( email )

Missionsstrasse 62a
Basel, 4055
Switzerland

Kevin Trutmann

Faculty of Psychology, University of Basel ( email )

Missionsstrasse 62a
Basel, CH-4055
Switzerland

Celine Rudin

University of Basel ( email )

Petersplatz 1
Basel, CH-4003
Switzerland

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