Incorporating sunk costs into the analysis of a strategic option is an example of escalation of commitment.

Question

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Incorporating sunk costs into the analysis of a strategic option can lead to an escalation of commitment, where decision-makers continue to invest resources into a project or course of action even when it is no longer rational or beneficial, simply because they have already sunk costs into it. This is a cognitive bias that can lead to poor decision-making and loss of resources.

Incorporating Sunk Costs into the Analysis of a Strategic Option