Escalation of commitment: what it is and how to recognise it

The project was failing. The team knew it was failing. The sunk investment made stopping feel like waste.

Escalation of commitment (also known as the sunk cost fallacy) is the tendency to continue investing resources into a failing course of action because of prior investments, despite evidence suggesting that discontinuing would be the better choice.

A Scene Worth Recognising

Maria kept repairing her old car even after the mechanic warned that the engine was beyond repair. She had already spent two thousand dollars on parts and felt that giving up would waste that money. Each time a new problem appeared, she bought another replacement, hoping the next fix would finally make the vehicle reliable. Friends suggested buying a used sedan, but Maria insisted that one more repair would solve everything, ignoring the growing repair bills and the safety concerns.

What it means and how it works

The primary psychological mechanisms include: (1) self‑justification and cognitive dissonance reduction—people want to believe their prior decisions were correct; (2) loss aversion—the pain of abandoning an investment feels larger than the potential gain from stopping; (3) desire to avoid regret or blame—continuing protects the decision‑maker from admitting a mistake; and (4) illusion of control—believing that additional effort can turn the situation around.

Escalation of commitment occurs when individuals or groups increase their commitment to a decision, project, or course of action after receiving negative feedback or facing clear signs that the endeavor is unlikely to succeed. The driving force is not rational expectation of future returns but a psychological need to justify past investments, avoid regret, and reduce cognitive dissonance. This bias can manifest in financial, interpersonal, and organizational contexts, leading to further losses when a more objective evaluation would recommend withdrawal.

Why it matters

Escalation of commitment can cause substantial financial losses in business (e.g., over‑funded failing projects), suboptimal public policy (e.g., persisting with ineffective programs), and personal distress (e.g., staying in unhealthy relationships). Recognizing the bias helps decision‑makers set objective cut‑off points, seek outside opinions, and implement pre‑commitment rules that limit further investment based on clear criteria rather than past sunk costs.

The verified research on this pattern supports the following:

Escalation of commitment leads to greater financial losses in business projects that continue despite negative feedback.
People escalate commitment to reduce cognitive dissonance and avoid admitting personal responsibility for a mistake.

Common misunderstandings

Misunderstanding 1: Escalation of commitment only involves money; it also applies to time, effort, emotional investment, and reputation.

Misunderstanding 2: The behavior is rational if future prospects improve; in reality, the bias persists even when objective forecasts remain negative.

Misunderstanding 3: Only inexperienced people fall for it; experts and executives are equally susceptible due to the same psychological drives.

Sources

Niroula, Rishab. REV 2.0 Topic Catalog. Hello to Halo.
Staw, Barry M. "Knee-Deep in the Big Muddy: A Study of Escalating Commitment to a Chosen Course of Action." Organizational Behavior and Human Performance 16, no. 1 (1976): 27–44.
Arkes, Hal R., and Catherine Blumer. "The Psychology of Sunk Cost." Organizational Behavior and Human Decision Processes 35, no. 1 (1985): 124–140.

The next time this pattern surfaces, the move is not to fight it — it is to notice it. Naming Escalation of commitment creates a moment of pause before the decision. That moment is usually enough.