Yes, what you describe is a sunk cost fallacy. I get it, people do fall for them, we're wired that way. But a public company with stockholders shouldn't make decisions like this. It's either better for the company to make the people come back, or it isn't. "The CEO has buyer's remorse" is not an argument for such a highly impacting decision.

You might be onto something with the cities asking for this, but I have not seen any data or anecdotes pointing to that.