A growing body of research reveals that our behavior and decisions are influenced by an array of strong psychological undercurrents.
Scientists have identified five flaws in how we think whenmaking decisions. They’re hardwired into our thinking process, so we often fail to recognize them.
First of 5 Flaws: Loss Aversion
We experience the pain associated with loss much more vividly than we do the joy of experiencing a gain.
For example, if egg prices go down, sales go up. But if egg prices rise proportionately, sales dip by 250 percent. Consumers stop buying them because the price has increased. This response flies in the face of traditional economic theory, which dictates that people should react to price fluctuations with equal intensity, regardless of whether price rises or falls. In reality, we illogically overreact to perceived losses.
This also explains why people are much more likely to buy meat when it’s labeled 85 percent lean instead of 15 percent fat. Similarly, twice as many patients opt for surgery when told there’s an 80 percent chance of survival, as opposed to a 20 percent chance of dying.