Michael could gamble four quarters in a carnival game, with the potential to win as many as 20 quarters. However, the possibility that he might end up with no quarters at all leads Michael to choose not to play. Michael's decision illustrates .
In cognitive psychology or behavioural economics or decision theory, loss aversion refers to the tendency of people to prefer not to lose something than to gain the equivalent amount if that thing. For example : it is better to not lose $100 than to find $100. Losses are felt more than gains are felt. in other words we gain a small utility when we actually gain compared to how the loss we feel when we actually lose. It is a very important principle in the domain of economics.
