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In cognitive science and behavioral economics, loss aversion refers to a cognitive bias in which the same situation is perceived as worse if it is framed as a loss, rather than a gain. [ 1 ] [ 2 ] It should not be confused with risk aversion , which describes the rational behavior of valuing an uncertain outcome at less than its expected value .
The correlation between the two theories is so high that the endowment effect is often seen as the presentation of loss aversion in a riskless setting. However, these claims have been disputed and other researchers claim that psychological inertia , [ 20 ] differences in reference prices relied on by buyers and sellers, [ 3 ] and ownership ...
In psychology and cognitive science, a memory bias is a cognitive bias that either enhances or impairs the recall of a memory (either the chances that the memory will be recalled at all, or the amount of time it takes for it to be recalled, or both), or that alters the content of a reported memory. There are many types of memory bias, including:
A famous loss-aversion experiment is to offer a subject two options: They can either either receive something like $30 in guaranteed money — or a coin flip where they can receive either $100 or ...
Overall, the study by Gneezy and Potters emphasizes the existence of myopic loss aversion, demonstrating how this bias can result in non-optimal decisions. By analyzing how prospect theory and myopic loss aversion influence decision-making, it provides the ability for researchers and policymakers to create interventions that help people make ...
The Cognitive Bias Codex. A cognitive bias is a systematic pattern of deviation from norm or rationality in judgment. [1] Individuals create their own "subjective reality" from their perception of the input. An individual's construction of reality, not the objective input, may dictate their behavior in the world.
Status quo bias has been attributed to a combination of loss aversion and the endowment effect, two ideas relevant to prospect theory.An individual weighs the potential losses of switching from the status quo more heavily than the potential gains; this is due to the prospect theory value function being steeper in the loss domain. [1]
For example, I love mushrooms, but many of my friends hate them," she says. "If the food aversion is related to distress, such as significant anxiety, and interferes with functioning, then it ...