Loss Aversion | Concepts Unwrapped

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In this step, you'll learn about loss aversion and prospect theory. Loss aversion is the tendency to prefer avoiding losses to acquiring gains, while prospect theory states that people will take much greater risks to avoid losing the things they have than they would have taken to gain them. This can lead to people committing unethical acts to cover up mistakes, out of fear of the potential loss of reputation or livelihood. People need to monitor their own actions and motivations to remain ethical, and have the courage to admit to even painful mistakes."