Investors' exit timing of PPP projects based on escalation of commitment.

Long project cycle and uncertainties are important characteristics of public-private partnership (PPP) projects. Since the introduction of PPP projects in China, the timing of capital withdrawal has become important. With the emergence of risk factors during the course of the project, it will face the problem of investment withdrawal by social capital financial investors. Escalation of commitment (EOC) refers to the erroneous behaviour of project decision makers who do not promptly withdraw from a project when they receive negative feedback and continue to invest resources in the project. EOC not only causes more unnecessary losses but also adversely affects decision makers. Therefore, it is crucial to clarify the impact of EOC on the choice of the exit timing of social capital. This article adopts literature survey method and quantitative analysis method: introducing the theory of maximization of income into the real option model, combining the net present value method with the binary tree option pricing model, constructing the decision-making model to analyze the exit timing of PPP social capital in the context of EOC. Then combined numerical simulation and empirical analysis to verify the effectiveness of the decision-making model, discussed the reasons why the social capital party chooses EOC, and proposes measures for controlling EOC. The higher the degree of completion of the project, the easier it is for the person in charge of the project to make inaccurate judgements about the project due to personal psychological factors, and the easier it is for EOC to occur. Therefore, after setting the minimum goal of the project, the decision maker needs to accurately evaluate the existing value of the project to avoid falling into decision-making errors.