Cognitive Biases Loss Aversion

Keep or Flip

You start with 50 coins. We will offer you six coin-flip bets — keep your pile, or flip.

1Each bet is a fair 50/50 flip: tails costs you some coins, heads pays you more.

2Decide to flip or keep your coins. We will toss the coin so you feel the swing.

3The flip is just for flavour — you are scored only on whether the bet was worth taking.

4After six rounds, see how much free money you turned down.

The concept· Kahneman & Tversky, 1979

Loss Aversion

Loss aversion is the tendency to feel the pain of a loss far more strongly than the pleasure of an equal-sized gain — roughly twice as strongly. We weigh "what I could lose" more heavily than "what I could win", even when the math clearly favours the bet.

A bet is worth taking when its expected value is positive — when, played many times, it leaves you richer on average. Loss aversion makes us decline these favourable bets just to dodge the chance of a small loss, leaving real money and good opportunities on the table over a lifetime of choices.