Will you ever take part in a bet where you lose $100 for every tail that comes up in a coin toss and gain $100 for every head that comes up? Probably no, I guess. What if the stakes is such that you still lose $100 for every tail that comes up but instead win $200 for every head? You will probably agree to it. This is what we called loss aversion. The first scenario is an entirely fair one. However, most people will not like the odds of it because the pain of losing something is usually far greater than the joy gained in winning something in equivalent value. The potential gain needs to be much higher to offset the pain of losing and hence most people will agree to the bets in the second scenario. I recently ran a poll of similar nature in my Telegram Group. Most…
