What is the aversion of loss?

The aversion of loss is the term applied to the tendency of investors to try to avoid loss even heavier than they try to make profits. Studies have shown that investors are more likely to sell good stocks to gain profit to sell bad to minimize loss. Psychologically, people tend to feel losses more acute than victory, and the loss often leads to a sense of regret. Enjoy that people can get people to confuse the bad result with a bad decision and, in extreme cases, have widespread effects on their trust in decision -making. This is one of the reasons why people are reluctant to upgrade durable goods with high tickets and risk financial risks. Sellers see the goods as a loss and according to the price. Buyers consider goods to be profit and budget accordingly. Problems occur when the seller and buyers do not see the eyes of the item values.

r RESPONSE RESPONSE AVERSION OF LOSS ON BY SIDE OF THE HEATING TABLE MAY CONSIDERS TO STATUS-QUO, which is a natural preference that KTEré things remain as they are. Nothing gets up, but nothing is lost. When evaluating the risk, especially financial, a certain type of individual or company tends to prefer the safety of the sameness over the stress of gambling.

Aversion loss can be prevented if the item has the same benefits as a traded item, even if it has different attributes. For example, buying a car is basically just trading with a certain amount of money for a car. If the customer thought the car would serve him as well as the amount of money, the transaction is completed without unwillingness, although the car and money are two very different things. Studies have shown that focusing on specific differences between the two items (driving a car versus spending) can lead to greater aversion of loss than focusing on similar benefits (both allow the level of freedom).

marketing departments use the aversion of losses to get their product to the publica conscience. Free management programs work on the idea that once the customer attempts a product, then evaluates how much he would pay to avoid the loss of this product rather than obtained. Delayed payments programs work in the same way. Standing in the store looking at the TV can block a $ 3,000 price mark. Once the television has been in its house for several months and enjoys it with its family every night, it is much more likely to decide that it is worth $ 3,000 to avoid loss.