Loss Aversion
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Loss aversion is a bias in human behavior that causes people to experience more pain from losses than they do pleasure from gains. This means that people are more motivated to avoid losses than they are to pursue gains. Loss aversion was first described by Amos Tversky and Daniel Kahneman in their 1979 paper, "Prospect Theory: An Analysis of Decision under Risk."
Applications of Loss Aversion
Loss aversion has been applied in a variety of fields, including economics, finance, marketing, and psychology. In economics, loss aversion has been used to explain why people are more likely to save money than they are to invest it. In finance, loss aversion has been used to explain why people are more likely to sell stocks when their prices are falling than they are to buy stocks when their prices are rising. In marketing, loss aversion has been used to explain why people are more likely to buy products when they are on sale than they are to buy them when they are not on sale. In psychology, loss aversion has been used to explain why people are more likely to experience negative emotions, such as fear and anger, when they lose something than they are to experience positive emotions, such as joy and happiness, when they gain something.
