Escalation of Commitment and Its Effect on Capital Budgeting: A Review of the Literature

INTRODUCTION It is commonly accepted among capital investors that null be selected, continued or terminated based on their net present values (NPV) (Statman and Caldwell, 1987). Investment decisions are typically future focused. In other words, decision makers exhibit prospective rationality. Often, however, when a financial setback occurs individuals become focused on past events; they exhibit retrospective rationality. They attempt to recoup...