Hyteresis and Uncertainty: The Effect of Uncertainty on Delays to Exit Decisions

Jennifer Denicolis Bragger, Donald Bragger, Donald A. Hantula, Jean Kirnan

Research output: Contribution to journalArticlepeer-review

43 Scopus citations

Abstract

The effects of feedback variability and the availability of information on exit decisions in a nonprofitable venture were investigated in a computer simulated marketing scenario. Half of subjects received feedback relatively low in variability and half of subjects received feedback substantially higher in variability. Half of subjects in each variability condition had the opportunity to purchase additional information regarding their investment. Subjects receiving feedback higher in variability delayed exit decisions longer, invested more often, and invested more resources than subjects receiving feedback lower in variability. Subjects with no opportunity to purchase information delayed exit decisions longer, invested more often, and invested more resources than subjects with the opportunity to purchase information. The results are consistent with Dixit's (1992) theory of uncertainty and hysteresis and indicate that an uncertain environment can affect whether a decision maker continues to invest when costs are higher than profits.

Original languageEnglish
Pages (from-to)229-253
Number of pages25
JournalOrganizational Behavior and Human Decision Processes
Volume74
Issue number3
DOIs
StatePublished - 1 Jun 1998

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