Economics Loss Aversion Questions
Regret avoidance refers to the tendency of individuals to make decisions based on avoiding potential future regrets. It is closely connected to loss aversion, which is the cognitive bias where individuals feel the pain of losses more strongly than the pleasure of equivalent gains. Loss aversion and regret avoidance are linked because individuals often make decisions to avoid potential losses in order to prevent future regrets. This can lead to risk-averse behavior, as individuals may choose to forgo potential gains in order to avoid the possibility of experiencing losses and subsequent regret.