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Loss aversion - The Decision Lab

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Loss aversion is a cognitive bias that describes why, for individuals, the pain of losing is psychologically twice as powerful as the pleasure of gaining. The loss felt from money, or any other valuable object, can feel worse than gaining that same thing.1 Loss aversion refers to an individual’s tendency to prefer avoiding losses to acquiring equivalent gains. Simply put, it’s better not to lose $20, than to find $20. Most of us work & live in environments that aren’t optimized for solid decision-making. We work with organizations of all kinds to identify sources of cognitive bias & develop tailored solutions. Loss aversion is a relevant concept in cognitive psychology, decision theory, and behavioral economics. Loss aversion is especially common when we make financial decisions. An individual is less likely to buy a stock if there is a potential risk of losing money, even though the reward potential is high. Notably, loss aversion grows stronger as the stakes of a choice grow higher.2

Why do we buy insurance? The Loss Aversion , explained. Bias Where this bias occurs Where this bias occurs Individual effects Systemic effects Why it happens Why it is important How to avoid it How it all started How it affects product Loss aversion and AI Example 1 – Taking financial risks Example 2 – Innovative Solutions in Brazil Summary Related TDL articles What is loss aversion? Loss aversion is a cognitive bias where the emotional impact of a loss is felt more intensely than the joy of an equivalent gain. Where this bias occurs Imagine finding $10 on the street. You'd probably feel prett

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