What is loss aversion and how does it affect decision-making?
Loss aversion is the psychological phenomenon where losses weigh more heavily on our minds than equivalent gains. This means that losing €100 causes more distress than the pleasure derived from gaining €100. As a result, individuals often make suboptimal decisions, such as holding onto losing investments longer than they should, due to the fear of realizing a loss.
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This is one answer. The complete system — the psychology, the biology, and the method — is in the book.
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