October 23, 2024
The Science of Loss Aversion
According to Nobel laureate Daniel Kahneman's prospect theory, people are wired to fear losses more than they enjoy gains. This means that the pain of losing $10 feels far more significant than the pleasure of gaining $10.
The idea is simple: if failing to complete a task means losing money, you’ll be more likely to act.
You can visualize this with the following graph:
The curve shows that losses feel more painful than the equivalent amount of gains feel pleasurable.