Loss Aversion

NEED TO ACT FASTSYSTEM 1Motivation and Commitment Loss Aversion

Visual Metaphor

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Definition

The tendency to prefer avoiding losses to acquiring equivalent gains. The pain of losing $100 is psychologically about twice as powerful as the pleasure of gaining $100.

Underlying Mechanism

Prospect Theory

Observable Markers

  • I can't lose
  • I'll lose everything
  • I have to keep
  • I can't give up
  • I'm afraid to lose

Examples

  • I won't sell my stock because I might lose money
  • I'd rather not risk losing $100 than gain $100

Insight

Notice: narrative emphasizes potential losses more than equivalent gains. Consider both sides of the equation and the actual probabilities.

Visual analysis of Loss Aversion cognitive bias showing NEED TO ACT FAST domain patterns
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Related Biases

Sunk Cost Fallacy

The phenomenon where a person is reluctant to abandon a strategy or course of action because they have invested heavily in it, even when it is clear that abandonment would be more beneficial.

7-Layer Framework Associations

Layer 3Layer 5

Research Notes

Core principle of Prospect Theory. Asymmetric valuation of gains and losses.

Literal Visualization

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