Psychology
What is Loss aversion?
Loss aversion is the tendency to feel the pain of a loss more strongly than the pleasure of an equal gain. Losing $100 hurts more than gaining $100 feels good — which powerfully shapes how people make decisions about risk and money.
See it, don’t just read it.
Watch a 2-minute lesson with voice + animation that explains loss aversion.
Key things to understand
- 1Losses feel worse than equal gains feel good.
- 2It makes people overly cautious to avoid losing.
- 3It strongly influences financial and risk decisions.
- 4It's a core idea in behavioral economics.
Frequently asked questions
- What is loss aversion?
- The tendency to feel losses more intensely than equivalent gains, so we work harder to avoid losing.
- Why does loss aversion matter?
- It explains why people avoid risk, hold losing investments too long, and react strongly to potential losses.
- Who discovered loss aversion?
- Psychologists Daniel Kahneman and Amos Tversky, as part of their work on prospect theory.