Pride before the fall: (Over)confidence predicts escalation of public commitment

- We examined the effect of overconfidence on escalation of commitment.
- In a private context, overconfidence is unrelated to escalation decisions.
- In a public context, overconfidence is positively related to escalation decisions.
- Individual differences in overconfidence are related to reputation sensitivity.
- Reputational concerns drive publicly announced investment decision.

In four studies we examined the effect of overconfidence on escalation of commitment in investment tasks. Study 1 (N = 105) revealed a positive relationship between overconfidence and decisions to escalate. In contrast, Study 2 (N = 121) showed that overconfidence was negatively related to escalation of commitment. The reversal of this effect appeared to emerge as a function of the public (Study 1) versus private (Study 2) context in which the investment decisions were made. In Study 3 (N = 108) and Study 4 (N = 380) we experimentally replicated this pattern of findings and found support for the explanatory role of reputational concerns. A meta-analysis of the findings from our four studies showed that overconfidence is positively related to escalation of commitment in public contexts, and that this relationship is absent when decisions are made privately.