Running head: Competitive Escalation Competitive Escalation and Interventions

max 250 words) Competitive escalation occurs frequently in manager i l nvironments, when decisions create sunk costs and decision makers compete under time pressure. In a series of experiments using a minimal dollar auction paradigm, we test interventions to prevent competitive escalation. Without any intervention, m ost people, including experienced managers, escalate an d lose money by bidding more than the price is wort h (e.g., more than 10 € for 10 €). We test several interventions, in which we provi de individuals with different types of experience: direct experience in structurally identical and in structurally similar situations, as well as direct experience in similar ly competitive situations (lacking the escalation dimension). We also study indirect experience based on vicariously learning about the situation’s consequences (experienced by others) and based on m ental simulation by setting oneself a limit regardi ng where to exit the competition. In three experiments (N = 1229), we find that direct experience in exac tly the same or a structurally similar situation allows individuals to prevent subsequent escalation, wher eas direct experience in a similar situation without es calation does not. Indirect experience based on vicarious-learning successfully reduces competitive escalation, whereas a goal-setting intervention th at has proven instrumental in reducing classic escalat ion of commitment is not effective. This pattern of variation in the effectiveness of different interve ntions is consistent with the theory of a cold ‒hot empathy gap that prevents people from anticipating how they will experience a competitive situation before entering it. As a methodological contribution, we d eveloped a deception-free computer-player dollarauction for online participants and a dynamic chick en game.