Dean Ashton put the Hammers ahead just before the break, and after Jihai Sun was sent off in the 56th minute, Ashton tapped in his second with 21 minutes remaining.
Sometimes playing with just two at the back, City kept going and rewarded when Kiki Musampa's volley gave us a lifeline in the 84th minute, but we were unable to snatch an equaliser.
"We conceded a bad goal just before half-time which cost us a bit, then Jihai getting sent off did not help at all," Pearce told the City website.
"But when we went down to 10 men it was a colossal effort from the players, I don't often give out compliments when my team gets beat but I thought they really stuck at it. They had a go, and they are absolutely devastated in there.
"I wish they could have a camera in the dressing room to know exactly how much it meant to the players," Pearce added. "If they saw that, they would be very proud of the players."
Before the defeat by Wigan on Saturday, we had won our last 7 at home, which makes our failure to reach the semi-finals all the more disappointing.
"The fact that we had a good home draw in the quarter-final of the FA Cup makes this a massive disappointment," admitted Pearce.
"It's down to me now to pick the boys up and hopefully get some results between now and the end of the season."
City made a promising start but then failed to create much up front. Pearce admitted the loss of Georgios Samaras was a key factor, but the absence of Andy Cole and a quiet game from Joey Barton surely had a big effect too.
"We started extremely well, we had our tails up and put them under pressure," added Pearce. "If I'm honest, maybe the lack of firepower has cost us with losing Georgios at the weekend, but I won't make excuses."