Escalation of Commitment
Why do we spend time and money on things, beyond what’s rational? Because of a toxic cocktail of sunk cost, lock-in, and overcommitment.
Escalation of commitment is the tendency to justify increased investment in a decision based on prior investment, despite evidence the decision may be wrong
Escalation of commitment (sometimes also called commitment bias) is the tendency to justify increased investment in a decision, based on the cumulative prior investment, despite new evidence suggesting the decision may be wrong and additional costs will not be offset by benefits.
Consider the example of two friends with tickets for a professional basketball game a long drive from where they live. On the day of the game there is a big snowstorm. The higher the price the friends paid for the tickets, the more likely they are to brave the blizzard and attempt driving to the game, investing more time, money, and risk (Thaler 2015: 20).* That’s escalation of commitment. In contrast, the rational approach when deciding whether to invest further in a venture would be to disregard what you have already invested.
Escalation of commitment is…
