Loss Aversion

People prefer to avoid losses more than earning equivalent gains

LOSS AVERSION DEFINITION

We hate losing or letting go of what we have (even if more could be had). Prospect theory says that a loss hurts more than an equal gain feels good. In other words, losing $1,000 will “hurt” more than the joy of gaining $1,000. Loss aversion can also lead to sunk cost fallacy. (Related: Endowment Effect)

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