A review of the literature concerning the escalation of commitment and the important role of the sunk-cost effect for this phenomenon is presented. Three features of an investment situation were hypothesized to moderate the sunk-cost effect: the cost of honoring a sunk cost (i.e., the magnitude of the additional cost), the possession of the investment object (i.e., endowment), and the effects of information processing (i.e., mental accounting).; Study One suggested that both mental accounting and the magnitude of the additional cost are important influences on the tendency to honor a sunk cost. Study Two illustrated the necessity of considering contextual factors when interpreting subjects' responses to sunk costs. Study Three verified the importance of both mental accounting and the magnitude of the additional cost. The last study, Study Four illustrated that, while endowment does not appear to directly affect the sunk-cost effect, it does significantly interact with other important factors to modify the tendency to honor sunk costs.; The implications of the major results are discussed. Possible interpretations of unexpected findings are also provided. Finally, the usefulness of a contextual analysis for interpreting and predicting sunk-cost effects is presented.
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