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Home > Psychologies > No. 141 Real Calm > Double or broke

Double or broke

Ever stayed in a job you hate because the alternative may be worse? Or remained in a not-so-great relationship because you can’t bear the thought of walking away? You may be exhibiting symptoms of loss aversion, as Lizzie Enfield explains

Self

The man in the garage said my car was unlikely to get through its next MOT and would have to be scrapped, but I could probably sell it now and get a few hundred quid. I was living in central London and hardly used the car. I could have done with a bit of extra money, but I was reluctant to get rid of the vehicle that I’d worked hard to buy.

So I kept it for a few more months, until the engine gave up and I had to pay someone to take it away.

My decision was not sensible, but it was a classic example of loss aversion – a term with its roots in economic theory – which refers to people’s tendency to prefer avoiding losses to acquiring equivalent gains. It’s evident in gambling habits. If people are prepared to risk money on a bet, they want more money in return. One-toone odds are not attractive. If we put £10 on a horse, we might be willing to lose the money if it does not win, but if it does win, then we want to get back more than the original £10.

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Psychologies June 2017 - Real Calm
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