Loss Aversion

📄 30 — Loss Aversion

Definition

People feel losses more strongly than equivalent gains.

When to Use

• Negotiations • Behavioral design • Investment decisions • Risk analysis

How It Improves Reasoning

It reveals emotional distortions that can lead to overly conservative or irrational choices.

Steps

1. Identify potential losses and gains.
2. Compare emotional vs rational weighting.
3. Adjust decision to reflect true value.

Example

People prefer avoiding a $100lossovergaining$100, even though the values are equal.

Prompts

• “Identify loss aversion in this decision.” • “Reframe this choice to reduce loss‑focused bias.”