Mandla purchases shares in a public company and refuses to sell them even after repeated drops in the original price he paid for the shares.Mandla has decided to purchase more of the shares in anticipation of making a profit, and has decided to keep the shares in the face of increasing losses.Mandla is suffering from
A) organisational delusion.
B) problem misidentification.
C) escalation of commitment.
D) groupthink.
E) suboptimising.

Question

Quizplus · Accepted Answer

Mandla is exhibiting escalation of commitment, which is the tendency of an individual or group to continue investing time, money or resources into a project, decision or situation that is failing or incurring losses, in the hope of eventually making a profit or recouping losses. This behavior is often irrational and driven by sunk cost fallacy, which is the belief that the more resources one invests in a project, decision or situation, the less likely they are to abandon it, even if rational analysis suggests that it might be more profitable to cut losses and move on.

Mandla Purchases Shares in a Public Company and Refuses to Sell