Escalation bias refers to the situation in which
A) investors have a propensity to sell winners too soon and hang on to losers too long.
B) investors ignore bad news and overemphasize good news.
C) investors tend to follow the herd.
D) investors put more money into a failure rather than into a success.
E) investors are all noise traders.

Question

Quizplus · Accepted Answer

Escalation bias, also known as the sunk cost fallacy, occurs when individuals continue to invest more resources (time, money, effort) into a failing project, decision, or investment, rather than cutting their losses. This is because they have already invested so much and hope to recoup their losses, rather than objectively assessing the likelihood of success.

Escalation Bias Refers to the Situation in Which