Organizational Sunk Costs

Large organizations are especially vulnerable to the sunk cost fallacy because accountability structures make it politically dangerous to cancel projects. The manager who championed a failing initiative risks their career by admitting the mistake, so they advocate for more funding instead.

The Pentagon's Joint Strike Fighter program ballooned from $233 billion to over $400 billion. At each review point, officials argued that cancellation would waste the billions already spent. The program survived not because it was succeeding but because too much had been invested to admit failure.