A real estate developer in the New Jersey area purchases a large tract of land and plans to build a condominium, plus a golf course and other amenities. The developer hopes to have sold all condos to the upwardly mobile software industry employees in the area. Halfway through the project, the recession hits the nation and people lose jobs. There are no takers for the condos the developer is building, as homebuyers look at less expensive options at a time when they wish to guard their savings very closely. The developer, however, dismayed at the huge investment he has already made in the project, decides that it would be unwise to stop the project and plans to go ahead with it. The developer's rationale is consistent with the idea of ________.
A) progress trap
B) post-purchase rationalization
C) buyer's remorse
D) escalation of commitment

Question

Quizplus · Accepted Answer

The developer's decision to continue with the project despite the lack of demand and financial losses is an example of escalation of commitment. This refers to the tendency to continue investing resources in a failing project or decision, often driven by the sunk cost fallacy or the desire to justify past investments.

A Real Estate Developer in the New Jersey Area Purchases