Question
For decades, business school students have learned that sunk costs are irrelevant to decision making, however, managers still find these costs difficult to ignore. Researchers
For decades, business school students have learned that sunk costs are irrelevant to decision making, however, managers still find these costs difficult to ignore. Researchers have shown that, far from ignoring sunk costs, many managers increase commitment to a project as sunk costs increase. Recent experimental research from a team at the University of Melbourne in Australia sheds more light on the precise motivations of managers who choose not to ignore sunk costs. The researchers found that the managers' personal motivations interact with the context of the specific project and the related sunk costs. Their study found that individuals who are focused on promotion become increasingly fixated on completion as the end of the project nears. While other managers are able to ignore fixed costs more consistently throughout the project life cycle, those who are focused on promotion are more likely to continue to invest in a project that should be abandoned when the project is close to completion. How would you advise a manager who is fixated on completion of a project that should be abandoned?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started