Prospect theory and closing costs are two reasons why people:
A)engage in escalation of commitment.
B)define problems in terms of preferred solutions.
C)make non-programmed decisions rather than programmed decisions.
D)engage in satisficing.
E)encourage employee involvement.

Question

Quizplus · Accepted Answer

Prospect theory states that people are more averse to losses than they are motivated by gains, which can lead to escalation of commitment - continuing to invest time and resources in a failing project in order to avoid the perceived loss of sunk costs. Closing costs can also lead to escalation of commitment, as people may feel reluctant to abandon a property purchase even if it turns out to be a bad decision, because they have already invested a significant amount of money in closing costs.

Prospect Theory and Closing Costs Are Two Reasons Why People