Tuesday, October 25, 2005

The pain of a loss...

Barry Tanenbaum has a nice article in the latest Card Player called "Understanding Poker Errors Through Prospect Theory -- Part 1, The pain of a loss is about twice as much as the joy of a gain."

Here's an excerpt:

To Mr. Spock, $100 is $100. It represents a value used to purchase goods and services. With humans, it is a different story. To most people, losing a fixed amount like $100 hurts more than gaining the same amount feels good. So, the subjective benefit of gaining $100 is less than the subjective pain of losing $100. In poker terms, people feel much worse (actually, about two to two and a half times as bad, according to Rachel) losing a bet than they feel good winning one.