Two thoughts of pshycology
Loss Aversion :
Loss aversion was first identified by Amos Tversky and Daniel Kahneman It refers to people’s tendency to prefer avoiding losses to acquiring equivalent gains. Loss aversion implies that one who loses $100 will lose more satisfaction than another person will gain satisfaction from a $100.
Loss aversion is always disproportionate to gain satisfaction. Here is the graph that shows the relationship between loss aversion and gain satisfaction.
Hyperbolic Discounting :
Hyperbolic discounting is a cognitive bias, where people choose smaller, immediate rewards rather than larger, later rewards and this occurs more when the delay is closer to the present than the future.
If you were offered the choice between $50 now and $100 a year from now, most would ask for the $50.However, given the choice between $50 in nine years or $100 in ten years you would be likely choose the $100 in ten years.
