Loss Aversion (Why do we fear losing more than we enjoy winning?)
Loss aversion, a brief explanation
What is the Loss Aversion?
The loss aversion is the tendency to fear losing more than enjoying winning or gaining something new.
Examples
Making a relatively ‘sage’ low return investment over a potentially lucrative new investment that carries risk.
Purchasing flood insurance for a property on high ground where there is no risk of flooding. The fear of losing property as a result of flooding can drive people to purchase such insurance.
The literature
Novemsky, N. & Kahneman, D. (2005). The boundaries of loss aversion. Journal of Marketing Research, 42(2). Doi: 10.1509/jmkr.42.2.119.62292
Wang, M., Rieger, M. O. & Hens, T. (2017). The impact of culture on loss aversion. Journal of Behavioral Decision Making, 30(2), 270-281. Doi: 10.1002/bdm.1941
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