Loss aversion
A loss affects us more than a gain of the same size, so we tend to avoid losing even if it means giving up a bigger gain.
What problem it addresses
It explains why we turn down favorable bets, struggle to let go of what we have and react more to what we lose than to what we gain.
An example
You are offered a coin toss. If it’s heads, you win $150. If it’s tails, you lose $100.
It’s a favorable bet, but most people turn it down (Kahneman, 2011).
Why it happens
We measure changes relative to what we already have, not the total amount.
Dropping below that point is felt more than rising by the same amount.
That’s why we avoid risks even when they suit us, and struggle to let go of what is already ours.
Applications in design
Use it like this
If it protects the person, tell them what they would lose by not acting: “Turn on backup so you don’t lose your photos.”
Avoid
Fake countdowns and offers that claim to expire and don’t.
Don’t fall for it
Swap “lose” for “gain” in the message. If it stops convincing you, it was the fear of losing.
×2.25
What the research says
That’s how much more losses weigh than gains of the same size, according to Tversky and Kahneman (1992).
Debated evidence. It has been replicated many times, but when it appears and how strong it is are debated: Gal and Rucker (2018) question whether it is a general principle.
Connections
Authors and works
- 1979
Daniel Kahneman and Amos Tversky
Described it as part of prospect theory.
- 1992
Amos Tversky and Daniel Kahneman
Estimated that a loss weighs about 2.25 times more than an equal gain.
Sources
Original sources
- Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica, 47(2), 263–291. View source: Kahneman, D., & Tversky, A. (1979)
- Tversky, A., & Kahneman, D. (1992). Advances in prospect theory: Cumulative representation of uncertainty. Journal of Risk and Uncertainty, 5(4), 297–323. View source: Tversky, A., & Kahneman, D. (1992)
Academic reviews
- Gal, D., & Rucker, D. D. (2018). The loss of loss aversion: Will it loom larger than its gain? Journal of Consumer Psychology, 28(3), 497–516. View source: Gal, D., & Rucker, D. D. (2018)
Secondary sources
- Kahneman, D. (2011). Thinking, fast and slow. Farrar, Straus and Giroux.
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