New Series – Loss Aversion

Imagine this scenario: a colleague offers to flip a coin and give you $20 if it lands on heads. If it lands on tails, you give him $20. Stop and ponder; would you accept that bet? For most of us, the answer is no. Behavioral science experts Amos Tversky and Daniel Kahneman performed an experiment which resulted in a clear example of human bias towards losses. The experiment involved asking people if they would accept a bet based on the flip of a coin. If the coin came up tails the person would lose $100, and if it came up heads they would win $200. The results of the experiment showed that on average people needed to gain about twice as much as they were willing to lose in order to proceed forward with the bet. This tendency reflects loss aversion, or the idea that losses generally have a much larger psychological impact than gains of the same size.
Although a fascinating piece of knowledge about human behavior, what does the concept of loss aversion have to do with the workplace?
Read this series for some approaches to answer that very question.
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