Gain versus loss

Gain versus loss

Did you ever lose an object and felt very upset? This might have been because that object was a gift from someone special or because you worked very hard to afford buying it. We tend to become attached to our possessions and feel anxious to give them up. The more we have, the more vulnerable we become since we have more to lose than to gain.

Loss aversion is an innate human characteristic that makes people intrinsically afraid of losing. When a person experiences a loss, strong negative emotions occur. The fear of experiencing a loss may prevent change from occurring. Since changes bring along the unknown, it can be difficult for a person to give up what they have and to try something new. Usually we are more upset about losing €10 than we are happy finding €10. When we are faced with a threat of losing something we never wanted, we will put extra energy into having it. Thus, you may want things you never imagined you would be interested in. The possibility of losing them forever changes our preferences and priorities.

The framing effect refers to how a statement is phrased to describe an outcome either positively (gain) or negatively (loss). For example; imagine there is a disease outbreak that is expected to kill people. “Programme A will save 200 people” whereas “programme C will kill 400 people”. Most people would choose programme A even though both programmes are identical. However, programme A is framed as risk aversion (it will save 200 people) whilst programme C is framed as risk taking (it will kill 400 people). The way the message is portrayed does not intend to show good over bad but rather positive or negative consequences.

When we are presented with something new we tend to compare it to something else. For example; if you are accustomed to buying cheap flight tickets costing €100 and you see an offer for a flight costing €300 you will feel like you are not really making a bargain. However, if you are used to buying €700 flight tickets, a €300 one will most definitely feel like a good bargain. The object or person you are comparing to becomes the anchor. Thus, gains and losses will be reflected according to what you are making the comparison to.

Our mind can play tricks on us without us even realising. Cognitive biases such as the ones mentioned above can influence how we make decisions. Being aware of them and understanding how they work can help us to be more conscious of the decision-making process. Remember that the way you frame a statement will impact the way listeners will respond to you. Focusing on gains rather than losses can also help you to have a more positive outlook on your life.

 

Reference:

Tversky, A., & Kahneman, D. (1981). The framing of decisions and the psychology of choice. Science, 211, 453-458.

 

 

Dr Marilyn Muscat is registered as an Educational Psychologist with the Health and Care Professions Council in the United Kingdom where she trained. She works with children, adolescents and their families to understand more about educational, social and emotional well-being concerns that they have and to help them improve upon their difficulties.

Phone:

+356 7929 1817