escalation of commitment
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A developer received financial backing for a new business financial center along a derelict section of the waterfront, a few miles from the current downtown area of a large European city. The idea was to build several high-rise structures, attract large tenants to those sites, and have the city extend transportation systems out to the new center.
Over the next decade, the developer believed that others would build in the area, thereby attracting the regional or national offices of many financial institutions. Interest from potential tenants was much lower than initially predicted, and the city did not build transportation systems as quickly as expected. Still the builder proceeded with the original plans. Only ater financial support was curtailed did the developer reconsider the project.
Using you knowledge of escalation of commitment, discuss at least three possible reasons why the developer was motivated to continue the project.
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Solution Summary
A developer received financial backing for a new business financial center along a derelict section of the waterfront, a few miles from the current downtown area of a large European city.
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One of the possible reasons was irrational escalation of commitment. In order to justify investors that his past decision was correct, he continued to invest more and more money in the project. He made irrational commitments to the project to prove that his past decision or ...
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