Psychology of Misjudgment #14. Deprival Super Reaction Tendency

[LongHaul]

14. Deprival Super Reaction Tendency

 

"The quantity of man’s pleasure from a ten dollar gain does not exactly match the quantity of his displeasure from a ten dollar loss. That is, the loss seems to hurt much more than the gain seems to help. Moreover, if a man almost gets something he greatly wants and has it jerked away from him at the last moment, he will react much as if he had long owned the reward and had it jerked away…"

 

In displaying Deprival Superreaction Tendency, man frequently incurs disadvantage by misframing his problems. He will often compare what is near instead of what really matters.

 

This can go in several directions. First is the losses hurt twice as much as gains feel good, which is prevalent in investing. Then there is the sunk cost fallacy and potential for loss aversion. And finally, there’s the drive to break even.

 

Casinos know this all too well, by designing games where you’re almost always thiiiis close to winning your money back. So you compound losses further.