Loss Aversion: Exploring the Influence of the Cognitive Bias on Decision-Making

Daniel Kahneman and Amos Tversky suggest that losses can be twice as powerful as gains psychologically. This paper aims to discuss the concept of loss aversion, exploring the influence of loss aversion on decision-making, and why we must deepen research about loss aversion. In this paper we discussed three application of loss aversion: In the Counter-Strike skin market, since the ownership between player and skin, loss aversion influence players to miss the best chance to gain profit, we pick butterfly knife as an example to explain this; In gambling, players keep trying to recover the original capital if they lose their first game, they may have a behavior about continuing to gamble called “chasing losses”; In the stock market, some investors sell the stock out too early since loss aversion, and investors are more sensitive to losses than gain. Experimental studies provide data for supporting the effects of loss aversion on decision-making.