Discuss escalation of commitment and provide an example

What will be an ideal response?

Escalation of commitment is the refusal to abandon an earlier decision even when it is no longer appropriate, which happens because the decision maker is highly committed to a course of action and wants to stay the course. It is also reflected in the phrase throwing good money after bad. It is also referred to as the sunk-cost trap. Lenders can fall into this trap when they lend money to a business which eventually runs into financial difficulty. Then the banker lends more funds in the hope of getting the company to pay back the loan. Instead, the company may go bankrupt and the lender does not recover the funds. The lender refused to see the earlier decision as a poor one that should be abandoned (stop lending to this business).