This chapter examines escalation in decision-making concerning Project Taurus. The analysis is based on the propositions of social-psychological theory and decision dilemma theory. The basic research question was whether persistence in a failing course of action results from decision errors or is basically an economically prudent response to difficult circumstances. More specifically, it was expected that escalation would either be characterized by irrational behaviour stemming from fear of failure, or that it would be a function of the decision-maker's information. Conversely, it was expected that withdrawal would result either when the costs of persistence overrode social and psychological pressures or when such pressures weakened. Alternatively, withdrawal would result when decision-makers' information clearly indicated that further investment in the project was futile. This chapter explores Project Taurus in the context of the city of London and the London Stock Exchange's role in the city. It considers what escalation is, the root cause of escalation, and the factors associated with escalation.
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