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The Ikea effect is a form of loss aversion. This alone shows that someone hasnt done their homework. "A bird in hand is worth two in the bush" is a popular say

The Ikea effect is a form of loss aversion. This alone shows that someone hasnt done their homework. "A bird in hand is worth two in the bush" is a popular saying with its equivalent in almost every culture. Diversification which is studied, recommended and practiced by almost every investor, CEO, child... Is related to loss aversion. There are many more real life examples of loss aversion.

watwut 8y ago
Calculated strategies to prevent loss are not loss aversion as psychologists use it. Neither is preventing catastrophic "I spend the rest of life in jail" loss.
- vezycash 8y ago
  Calculated or not, loss aversion is loss aversion. The principle, thinking or motive behind diversification isn't investment growth. It's to prevent total loss. I'm other words, loss aversion. You said nothing about the Ikea effect. Here's more. Why do people stay in abusive relationships with individuals & companies? I've put in so much, can't back off now. Scammers know and use this to great effect. Once you've paid, you'll keep paying. Why do investors rush to sell winning stocks but stick stubbornly to losing losing stocks or trades? The network effect is powerful because of loss aversion. "All my contacts, friends, pictures are in..." so I can't switch. LOSS AVERSION CHEAT SHEET. Ask anyone for the reason behind an action. If the sentence begins with or is dominated by, "I don't want" or "I didn't want..." the action was motivated by loss aversion.
  - Jweb_Guru 8y ago
    This is not loss aversion and is explicitly covered in the article.
    - vezycash 8y ago
      Whether my example was stated explicitly in the article is irrelevant. What's important is the primary motive behind an action. In fact, strategy in military, business and soccer is divided into two - offensive and defensive. Offensive strategies are primarily motivated by gain. Defensive - by turf protection, prevent loss of market, or prevent a goal. Both strategies use similar, virtually the same tools. And like loss aversion the difference is simply motive. If China learns that Iceland is planning an attack on them and decides to attack first, it's a defensive strategy. Again, the key is motive. It doesn't matter what the action is, what matters is why it's done. If I kill someone for the heck of it (gain), it's called murder. If instead, it's to protect myself (loss aversion) it's called self defense. Limiting loss aversion to just financial behavior is a myopic view of the subject.
      - watwut 8y ago
        The discussion is about loss aversion phenomenom as defined and used in psychology. It is not about what you intuitively guessed from how it sounded like to you. But also, you horribly simplified military and soccer strategies too. Fun fact: army can decide for offensive strategy, because defense would end up in bigger losses. They may also go for defensive strategy despite bigger loss, bc some other reason. Lastly, no not every kill to protect yourself is self defense. That is not how law and sentencing works.
pbhjpbhj 8y ago
I hadn't heard of The IKEA effect: >"The IKEA effect is a cognitive bias in which consumers place a disproportionately high value on products they partially created." // Which is a weird turn of phrase, as almost all IKEA stuff is already fully created, you just fit it together. I guess they mean something you put effort in to realising. I'm not sure I agree, I think people preference stuff they took part in the production of (like kids helping with cooking their own tea), but I'm not sure we consider them higher value in an objective sense ... we often prefer things that we know to be of objective lower value, like in sentimental attachment.
- wpietri 8y ago
  I think you're confusing two meanings of value. There's an intellectual assessment of market price, a "how much could I sell this for" calculation. But there's also the observed, behavioral notion of value, which is derived from the actions people take. What you call "preference" is what people often mean by "value".
  - pbhjpbhj 8y ago
    Nah, I think I'm considering non-fiduciary extrinsic value. Which is different to market value and different to preference-value. For example (fictional), I have an old Pentium CPU, it has zero (general) market value as a functioning object; it has some cultural value as an historic artefact; it may be highly valuable to some geek somewhere, eg to run equipment they might otherwise not be able to run; it has sentimental value to me as my first CPU. My preference is unrelated to the intrinsic value of the item.

watwut 8y ago

Calculated strategies to prevent loss are not loss aversion as psychologists use it. Neither is preventing catastrophic "I spend the rest of life in jail" loss.

vezycash 8y ago
Calculated or not, loss aversion is loss aversion. The principle, thinking or motive behind diversification isn't investment growth. It's to prevent total loss. I'm other words, loss aversion. You said nothing about the Ikea effect. Here's more. Why do people stay in abusive relationships with individuals & companies? I've put in so much, can't back off now. Scammers know and use this to great effect. Once you've paid, you'll keep paying. Why do investors rush to sell winning stocks but stick stubbornly to losing losing stocks or trades? The network effect is powerful because of loss aversion. "All my contacts, friends, pictures are in..." so I can't switch. LOSS AVERSION CHEAT SHEET. Ask anyone for the reason behind an action. If the sentence begins with or is dominated by, "I don't want" or "I didn't want..." the action was motivated by loss aversion.
- Jweb_Guru 8y ago
  This is not loss aversion and is explicitly covered in the article.
  - vezycash 8y ago
    Whether my example was stated explicitly in the article is irrelevant. What's important is the primary motive behind an action. In fact, strategy in military, business and soccer is divided into two - offensive and defensive. Offensive strategies are primarily motivated by gain. Defensive - by turf protection, prevent loss of market, or prevent a goal. Both strategies use similar, virtually the same tools. And like loss aversion the difference is simply motive. If China learns that Iceland is planning an attack on them and decides to attack first, it's a defensive strategy. Again, the key is motive. It doesn't matter what the action is, what matters is why it's done. If I kill someone for the heck of it (gain), it's called murder. If instead, it's to protect myself (loss aversion) it's called self defense. Limiting loss aversion to just financial behavior is a myopic view of the subject.
    - watwut 8y ago
      The discussion is about loss aversion phenomenom as defined and used in psychology. It is not about what you intuitively guessed from how it sounded like to you. But also, you horribly simplified military and soccer strategies too. Fun fact: army can decide for offensive strategy, because defense would end up in bigger losses. They may also go for defensive strategy despite bigger loss, bc some other reason. Lastly, no not every kill to protect yourself is self defense. That is not how law and sentencing works.

pbhjpbhj 8y ago

I hadn't heard of The IKEA effect: >"The IKEA effect is a cognitive bias in which consumers place a disproportionately high value on products they partially created." // Which is a weird turn of phrase, as almost all IKEA stuff is already fully created, you just fit it together. I guess they mean something you put effort in to realising. I'm not sure I agree, I think people preference stuff they took part in the production of (like kids helping with cooking their own tea), but I'm not sure we consider them higher value in an objective sense ... we often prefer things that we know to be of objective lower value, like in sentimental attachment.

wpietri 8y ago
I think you're confusing two meanings of value. There's an intellectual assessment of market price, a "how much could I sell this for" calculation. But there's also the observed, behavioral notion of value, which is derived from the actions people take. What you call "preference" is what people often mean by "value".
- pbhjpbhj 8y ago
  Nah, I think I'm considering non-fiduciary extrinsic value. Which is different to market value and different to preference-value. For example (fictional), I have an old Pentium CPU, it has zero (general) market value as a functioning object; it has some cultural value as an historic artefact; it may be highly valuable to some geek somewhere, eg to run equipment they might otherwise not be able to run; it has sentimental value to me as my first CPU. My preference is unrelated to the intrinsic value of the item.