At its root, this phenomenon occurs simply and innocently enough - when a project or a proposal's success suddenly appears unattainable or unfeasible, managers often think that by adding "just a few more people" to the project, or throwing a few more dollars at it will help get things off the ground. For whatever reason, be it that the project is their own brainchild, or that they are simply too stubborn to let go, they are too immersed in the original project plan and and are thus reluctant to back away and look for new alternatives. This type of attitude costs these leaders and their organizations much time, money and energy which could better be spent on other options.
So how then, does one avoid escalation of commitment? First, when you receive information which suggests that your current course of action is now a poor one, you must ask yourself "What personal rewards can I gain from this course of action?" Make sure you keep the outcome of the doomed action plan in mind, and not just the process of proceeding with the plan itself. Secondly, you should set threshold limits which, if no longer can be met, should signal you to change your course of action at once.
Finally, you should be aware of the idea of sunk costs. Realize that this money is essentially water under the bridge; don't hang on to ideas and action plans which have little chance of success just because lots of money has already been invested into it.