Loss aversion affects decisionmaking from "summary" of Misbehaving by Richard H Thaler
Loss aversion is a fundamental concept in behavioral economics that explains how people are more sensitive to losses than gains. This means that the pain of losing $100 outweighs the pleasure of gaining $100. This asymmetry in our emotional response to losses and gains has a profound impact on decision-making. When faced with a decision, individuals tend to weigh potential losses more heavily than potential gains. This leads to a reluctance to take risks that could result in losses, even if the potential gains outweigh the potential losses. For example, people are more likely to hold onto a losing stock in the hopes that it will rebound, rather than cutting their losses and moving on. Loss aversion can also lead ...
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