Escalation in Decision-Making : Behavioural Economics in Business

When a venture seems to be faltering, do you persist and hope that things will get better or do you cut your losses? This may be one of the most important decisions business or project owners may ever have to make. Persistence involves the risk of throwing good money (or resources) after bad, but owners may feel they have too much invested to quit now.

Escalation in Decision-Making reveals why social scientists believe that owners may not respond rationally to such predicaments. Instead of exiting when the odds are clearly stacked against them, they re-invest and end up compounding their losses