#ProspectTheory

Loss aversion is a common cognitive bias. People feel losses more intensely than equivalent gains. In practical terms, it means many prefer avoiding a risk that could cost 1,000 baht to pursuing a chance to win 1,000 baht. This tendency shapes choices in money, health, education, and public policy.

The concept comes from the work of psychologists Amos Tversky and Daniel Kahneman, foundational to prospect theory. Studies show that the pain of losing can be roughly twice as strong as the pleasure of gaining. As a result, people often demand larger potential rewards to take a risk and may act cautiously to protect what they have.

Imagine being offered a bet: flip a coin, and if it lands heads, you win 1,000 baht—but if it lands tails, you lose 1,000 baht. Most people, in Thailand or around the world, would decline such an even-odds bet. This instinctive fear of losing—despite the potential to win an equal amount—is no accident. In fact, it is a well-documented psychological phenomenon known as “loss aversion”, which profoundly shapes human decision-making in daily life, finance, relationships, and even national policy.