How to Choose –  SHOW NOTES

Season 3, Episode 8 : My Precious! (Loss Aversion)

Tessa Mudge & Ken Smith


Ever find yourself unwilling to give something up, despite being convinced that this is the best decision? You might be suffering from loss aversion.


Humans have a stronger emotional response to a loss than to a gain of equal value. As the decision lab points out, it’s better to not lose $20 than it is to find $20

Loss aversion is closely related to something called the endowment effect where humans assign greater value to goods that they own than to identical goods they do not own.

Our vulnerability to loss aversion is exploited by insurance companies and by any company that offers you a free trial – realising that it will be hard for you to give up that subscription once you have it.


This journal article describes observations of the body’s physical response to loss aversion.


Pause and reflect – are you unhappy in an area of your life? What’s stopping you from making a change? Sometimes the reason can be that we’re more concerned about what we might lose than what we might gain. If so, loss aversion might be at play.

Be aware next time an insurance company tries to get you to upgrade your cover. Loss aversion can make us irrationally afraid.


In our next episode we’ll be talking about group think – don’t miss it!

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