Updated: Jun 2
Loss Aversion is the idea that people are more motivated to avoid losses than to acquire equivalent gains. This means that people are more likely to take action to avoid a loss than to acquire a gain of equal value. For example, a person may be more likely to take steps to avoid losing $100 than to acquire an additional $100.
Examples: Loss Aversion can be seen in many areas of life. For example, people may be more likely to take steps to avoid losing money in the stock market than to make money. Similarly, people may be more likely to take steps to avoid losing a job than to find a new job. Loss Aversion can also be seen in relationships, where people may be more likely to take steps to avoid losing a partner than to find a new one.
Effects: Loss Aversion can have a powerful effect on decision-making and behavior. People may be more likely to take risks to avoid losses than to acquire gains. This can lead to irrational decision-making and behavior, as people may be more likely to take risks that are not in their best interest. Loss Aversion can also lead to a feeling of regret, as people may feel regretful for not taking steps to avoid a loss.
Do you want to expand your knowledge on this topic? Read our full in-depth article on cognitive biases.
Do you have extra 15 minutes today? Take our fun and interactive quiz to learn which of 16 reasoning styles you use, your overall level of rationality, and what you can do now to improve your rationality skills.