Behavioural economics
Loss Aversion
The psychological tendency, identified in prospect theory, for losses to feel roughly twice as powerful as equivalent gains, shaping risk and consumption decisions.
Definition
Loss aversion is a cognitive bias described by Kahneman and Tversky in their 1979 prospect theory: people experience losses as substantially more painful than equivalent gains are pleasurable — losses are commonly estimated to "loom" about twice as large. It explains risk aversion for gains, risk seeking to avoid sure losses, and the endowment effect.
References
1979 origin, losses loom roughly twice as large as gains
Overview
What it means
Because people fight harder to avoid losing what they have than to obtain something new, framing changes behaviour: a carbon tax framed as a "loss" provokes stronger resistance than an equivalent price signal framed as a foregone bonus.
How it is used
Behavioural insights teams apply loss aversion in designing sustainability interventions — default green tariffs, deposit-return schemes, loss-framed energy feedback — and it explains consumer resistance to giving up conveniences.
Why it matters
Many sustainability transitions require people to give something up; understanding loss aversion helps policymakers design measures that gain public acceptance rather than trigger backlash.
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