What is Loss Aversion? (Easiest Explanation)

Loss aversion is a psychological concept that refers to the tendency for individuals to prefer avoiding losses over acquiring equivalent gains. This principle, rooted in behavioral economics, suggests that the pain of losing is psychologically more impactful than the pleasure derived from an equivalent gain. As a result, people often make decisions that prioritize the minimization of potential losses, even at the expense of potentially beneficial opportunities. This bias can significantly influence financial decisions, risk-taking behaviors, and overall decision-making processes in various aspects of life.