NFS 244 Lecture Notes - Lecture 18: Status Quo Bias, Amygdala, Conservative Force
17 Aug 2020
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Document Summary
Negative emotions override positive emotions in many situations. Result of the amygdala registering the reflexively increasing emotional response. One bad interaction can ruin a long relationship or friendship. Want gain to be 1. 5 - 2. 5 x the value of the loss. Often perceive no possible loss with free . The endowment effect: we assign inflated value to our own possessions. Hard to change someone"s food/exercise habits because they may experience loss. Benefits of making a change need to be large enough to overcome feelings of loss. Loss aversion functions relative to a reference point. Reference point can be a future goal, but often is our status quo. Loss aversion is a conservative force, helping us to lead stable lives, but also sometimes keeping us stuck. Option automatically selected when there is no choice explicitly expressed. We feel losses more heavily than we feel gains. Loss aversion can lead us to sticking in the status quo.
