Loss AversionOpen Access

Loss Aversion

We feel more negative when losing something than positive when we gain it

From selling bad investments to letting go of what we own, our avoidance of loss impacts our decisions and attitude to risk.

Fryer et al. (2012). Enhancing the efficacy of teacher incentives through loss aversion: a field experiment. NBER Working Paper No. 18237.

The study

Setup

Setup

150 teachers  in Chicago were either offered a cash incentive up front or after their students’ math test, with better results leading to more money. Subject to results, the money-up-front group would suffer deductions for unmet targets to create a feeling of loss aversion.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

Results

Results

Teachers receiving  money up front were found to have much better results than those rewarded at the end.

Study graph
np_read_2490885_000000

Fryer et al. (2012). Enhancing the efficacy of teacher incentives through loss aversion: a field experiment. NBER Working Paper No. 18237.

Key Takeaways

1
1

Increase conversion with trial offers. Though some consumers might not be willing to pay the market price for your product, they may pay the market price to avoid it being taken away.

Takeaway image
2
2

Offer delayed payments to shift consumers’ judgements from paying to get the product to paying to avoid losing it. For instance, a month delay in paying subscription fees. This means that any extra budgetary cost is then re-estimated as a question of how it can be fitted into an existing budget.

Takeaway image
3
3

Replace faulty products immediately with an identical or superior model (Novemsky & Kahneman, 2005). Doing it quickly will limit the pain of loss aversion, which builds over time (Strahilevitz and Loewenstein, 1998).

Takeaway image
4
4
Takeaway image
Takeaway image
np_read_2490885_000000
np_read_2490885_000000

In further detail

Takeaway image
Loss Aversion

Loss Aversion

We feel more negative when losing something than positive when we gain it

From selling bad investments to letting go of what we own, our avoidance of loss impacts our decisions and attitude to risk.

The study

Setup

150 teachers  in Chicago were either offered a cash incentive up front or after their students’ math test, with better results leading to more money. Subject to results, the money-up-front group would suffer deductions for unmet targets to create a feeling of loss aversion.

Results

Teachers receiving  money up front were found to have much better results than those rewarded at the end.

study graph
np_read_2490885_000000

In detail

Hungry for more?

Nuggets In The Wild

Related "Wilds"

Conversion

Reframing fees as benefits

How clothing marketplace Vinted neatly reassure and motivate buyers to use their platform.

Read more
Nugget In The Wild Illustration
Nuggets In The Wild

Related "Wilds"

Communication

Making statistics hit hard

By making abstract facts more relatable and personal, we create a powerful opportunity to change perceptions and behaviour. This campaign is a great example.

Read more
Nugget In The Wild Illustration
Nuggets In The Wild

Related "Wilds"

Experience

Offsetting painful loss with reassuring certainty

How UK supermarket Tesco provide a little extra information on sold out products to turn the dread of losing out into a reassuring future event we look forward to

Read more
Nugget In The Wild Illustration
Nuggets

Snack on these...

Open access, foundational Nuggets

Scarcity

Scarcity

We value things more when they’re in limited supply

Social Proof

Social Proof

We copy the behaviors of others, especially in unfamiliar situations

Prospect Theory

Prospect Theory

A loss hurts more than an equal gain feels good

Reciprocity

Reciprocity

We’re hardwired to return kindness received

Framing

Framing

We make very different decisions based on how a fact is presented

Loss Aversion

Loss Aversion

We feel more negative when losing something than positive when we gain it

Default Effect

Default Effect

We tend to accept the option pre-chosen for us

Anchoring

Anchoring

What we see first affects our judgement of everything thereafter

Fast & Slow Thinking

Fast & Slow Thinking

We make knee-jerk spontaneous decisions that can cause regretful damage

Dynamic Norms

Dynamic Norms

We’re more likely to change if we can see a new behavior developing

Salience

Salience

Our choices are determined by the information we're shown

Connected to

Hungry for more?

Savour the full features of Coglode Cookbook

All Nuggets, data & takeaways

Academic data

Key takeaways

Pairings

Cheat Sheets

Collect Nuggets

Nuggets In The Wild

Monthly Coglode Live calls

Upgrade
© 2013-23 Coglode

Running workshops?

Loss Aversion

is included in Box One of our physical workshop tool.
is included in Box Two of our physical workshop tool.
Nuggets Boxes

What's Cooking?

Coglode Live

Self-Expression Live video and deck now available
Self-Expression Live video and deck now available
This week
May 2023

Coglode Live

Self-Expression Live event announced
Self-Expression Live event announced
This week
Apr 2023

Coglode Live

Feedback Loops video and deck now available
Feedback Loops video and deck now available
This week
Apr 2023

Feature

Figma Behavioral Design System released
Figma Behavioral Design System released
This week
Apr 2023

Feature

Figma Behavioral Design System sneak-peek
Figma Behavioral Design System sneak-peek
This week
Apr 2023

Coglode Live

Feedback Loops Live event announced
Feedback Loops Live event announced
This week
Mar 2023

Coglode Live

Prospect Theory video and deck now available
Prospect Theory video and deck now available
This week
Mar 2023

New Nugget In The Wild

Reframing service fees as benefits
Reframing service fees as benefits
This week
Mar 2023

Feature

Cookbook for Teams announced
Cookbook for Teams announced
This week
Mar 2023

New Nugget In The Wild

Deliveroo's tipping system, behaviourally deconstructed
Deliveroo's tipping system, behaviourally deconstructed
This week
Feb 2023

Improvement

Nuggets In The Wild component redesigned and rebuilt
Nuggets In The Wild component redesigned and rebuilt
This week
Feb 2023

Feature

Completed core of forthcoming Nuggets Library for Figma
Completed core of forthcoming Nuggets Library for Figma
This week
Feb 2023

New Nugget In The Wild

Flora case study into overcoming stagnant social proof
Flora case study into overcoming stagnant social proof
This week
Feb 2023

Coglode Live

Open Access Prospect Theory Event added
Open Access Prospect Theory Event added
This week
Feb 2023

New Nugget In The Wild

Case study that reframes product waste into a playful second life for cats
Case study that reframes product waste into a playful second life for cats
This week
Feb 2023

Improvement

Improved persistent login pane
Improved persistent login pane
This week
Feb 2023

New Pairing

New combo of Nuggets that reinforce the 'best' choice centrally
New combo of Nuggets that reinforce the 'best' choice centrally
This week
Feb 2023