Escalation of commitment refers to the tendency for individuals or organizations to continue investing in a failing course of action, despite evidence suggesting that it is unwise to do so. This phenomenon often arises from psychological factors such as sunk cost fallacy, where past investments influence current decision-making, leading to irrational choices and a refusal to abandon failing strategies. This behavior contrasts sharply with traditional finance principles that emphasize rationality and objective analysis in decision-making processes.
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