Loss Theory

Loss Theory explores how individuals and organizations perceive and respond to losses compared to gains. It suggests that losses often have a greater emotional impact than equivalent gains—a concept known as loss aversion. For example, losing $100 feels more distressing than the pleasure of gaining $100. This theory helps explain behaviors like risk aversion or reluctance to abandon familiar options, emphasizing that our decision-making is heavily influenced by the psychological weight of potential losses. Ultimately, Loss Theory provides insights into why people often act to minimize losses even when potential gains might be achievable.