Loss Aversion

In economics and decision theory, loss aversion refers to people's tendency to strongly prefer avoiding losses to acquiring gains. Some studies suggest that losses are twice as powerful, psychologically, as gains.[citation needed] Loss aversion was first demonstrated by Amos Tversky and Daniel Kahneman.This leads to risk aversion when people evaluate an outcome comprising similar gains and losses; since people prefer avoiding losses to making gains.Loss aversion may also explain sunk cost effects.Loss aversion implies that one who loses $100 will lose more satisfaction than another person will gain satisfaction from a $100 windfall.
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