Case Study: Overcoming Loss Aversion and the Desire to Sell When the Market is Down

If we were playing a game and were to offer you a choice of a sure win of $50 or, on the toss of a coin, a chance to win $100 or nothing, while the probabilistic outcome (50% probability of $0 plus the 50% probability of $100) you would likely choose the guaranteed $50 according to scientific studies. After all, it’s a sure thing—you win. But let’s say we change the rules in the second round, and we offer you a sure loss of $50 or, on the toss of a coin, the chance to lose $100 or lose nothing at all, again the same -$50 probabilistic outcome. What would you pick?