A Behavioral Study on Abandonment Decisions in Multistage Projects

• 成果类型: Article
• 署名作者: Long, Xiaoyang; Nasiry, Javad; Wu, Yaozhong
• 署名单位: University of Wisconsin System; University of Wisconsin Madison; Hong Kong University of Science & Technology; National University of Singapore
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2018.3270
• 发表日期: 2020
• 页码: 1999-2016
• 关键词: project management; continue/abandon decisions; reference dependence; Sunk cost effect; status quo bias

摘要

In uncertain environments, project reviews provide an opportunity to make continue or abandon decisions and thereby maximize a project's expected payoff. We experimentally investigate continue/abandon decisions in a multistage project under two conditions: when the project is reviewed at every stage and when review opportunities are limited. Our results confirm findings in the literature that project abandonment tends to be delayed; yet, we also observe premature termination. Decisions are highly path dependent; in particular, subjects are more likely to abandon after observing reduced project value, and abandonment rate is higher near the middle-rather than near the beginning or end-of a project. Interestingly, when reviews are limited, subjects are less likely to continue a project that should be abandoned. At the same time, subjects are more inclined to review again after receiving negative (rather than positive) news. Our data are explained well by a model that incorporates three behavioral concepts-gains or losses from comparing the project value with an internal adaptive reference point, sunk cost bias, and status quo bias. Our work suggests that more frequent reviews need not lead to better project performance, and it also identifies contexts in which outside intervention is most valuable in project decision making.