Loss Aversion and the Sunk Cost Fallacy Defined & Explained in One Minute
Loss aversion is a pretty fascinating thing about us humans, as not just economists but also psychologists can confirm. It's precisely loss aversion that makes the average person prefer would rather not lost $100 than win $100. As such, we tend to fall victim to the sunk cost fallacy. Simply put, the sunk cost fallacy revolves around throwing good money after bad. To put it differently, a textbook example of the sunk cost fallacy would be investing $10,000 in a business and after realizing it's just not working, throwing more money at it instead of moving on. As you can see, loss aversion and the sunk cost fallacy are definitely in the real of irrationality but, unfortunately, lots and lots of people are guilty of such behavior. In one minute, I've defined as well as explained loss aversion on the one hand and the sunk cost fallacy on the other. By properly understanding these two terms, you dramatically increase the likelihood of becoming a more rational economic actor. To support the channel, give me a minute (see what I did there?) of your time by visiting OneMinuteEconomics.com and reading my message. Bitcoin donations can be sent to 1AFYgM8Cmiiu5HjcXaP5aS1fEBJ5n3VDck and PayPal donations to [email protected], any and all support is greatly appreciated! Oh and I've also started playing around with Patreon, my link is: / oneminuteeconomics Interested in reading a good book? My first book, Wealth Management 2.0 (through which I do my best to help people manage their wealth properly, whether we're talking about someone who has a huge amount of money at his disposal or someone who is still living paycheck to paycheck), can be bought using the links below: Amazon - https://www.amazon.com/Wealth-Managem... Barnes & Noble - http://www.barnesandnoble.com/w/wealt... iBooks (Apple) - https://itun.es/us/wYSveb.l Kobo - https://store.kobobooks.com/en-us/ebo... My second book, the Wall Street Journal and USA Today bestseller The Age of Anomaly (through which I help people prepare for financial calamities and become more financially resilient in general), can be bought using the links below. Amazon - https://www.amazon.com/Age-Anomaly-Sp... Barnes & Noble - https://www.barnesandnoble.com/w/the-... iBooks (Apple) - https://itunes.apple.com/us/book/age-... Kobo - https://www.kobo.com/ww/en/ebook/the-... Last but not least, if you'd like to follow me on social media, use one of the links below: / oneminuteeconomics / andreipolgar / andrei-polgar-9a11a561
