William invested in an initial public offering.After a month he lost 5 percent.After a year he lost 50 percent.After two years he lost 80 percent.William's decision to keep the investment is an example of
A) bounded optimization.
B) escalation of commitment.
C) programmed decision making.
D) strategic maximization.
E) intuitive rationality.

Question

Quizplus · Accepted Answer

William's decision to keep the investment even after experiencing consecutive losses is an example of escalation of commitment. This means that he continued to invest in the hope of redeeming his losses, despite evidence suggesting that his investment was not performing well. It is a common human tendency to invest more in a failing venture in the hope of making up for the previous losses. This decision-making pattern is called escalation of commitment.

William Invested in an Initial Public Offering