Loss aversion & framing

Loss aversion is the finding that losses feel roughly twice as painful as equivalent gains feel good, so people work harder to avoid a loss than to achieve the same-sized gain. It is a central idea in prospect theory, which describes how people actually evaluate risky choices: not against their total wealth, but as gains and losses relative to a reference point — usually the status quo. Because of this, how a choice is framed changes the decision even when the underlying facts are identical: the same outcome described as a gain versus a loss can flip people's willingness to take a risk. Loss aversion explains behaviours like holding losing investments too long, the endowment effect, and why 'don't lose what you have' is such a powerful pitch — the reference point, not just the outcome, drives the choice.