Journal of Economic Behavior & Organization Vol. 39 (1999) 59–82 The econometrics and behavioral economics of escalation of commitment: a re-examination of Staw and Hoang’s NBA data Colin F. Camerer, Roberto A. Weber * Division of Humanities and Social Sciences, 228-77, California Institute of Technology, Pasadena CA 91125, USA Received 21 August 1997; received in revised form 16 September 1998; accepted 28 September 1998 Abstract We examine the phenomenon of escalation from an economist’s perspective, emphasizing ex- planations which do not rule out rational behavior on the part of firms or agents. We argue that escalation cannot be established as a separate phenomenon unless these possible alternative ex- planations are properly accounted for. We present Staw and Hoang’s (1995) study of NBA data as an instance of where evidence of escalation might be overturned upon more careful analysis. After performing several tests of our alternative explanations, we find that evidence of escalation persists, although it is weaker both in duration and magnitude. ©1999 Elsevier Science B.V. All rights reserved. JEL classification: D23 Keywords: Escalation; Sunk cost fallacy; Behavioral economics 1. Introduction ‘Escalation of commitment’ occurs when people or organizations who have committed resources to a project are inclined to ‘throw good money after bad’ and maintain or increase their commitment to the project, even when its marginal costs (MC) exceed marginal benefits * Corresponding author. E-mail: rweber@hss.caltech.edu 0167-2681/99/$ – see front matter ©1999 Elsevier Science B.V. All rights reserved. PII:S0167-2681(99)00026-8