Aversion to a Sure Loss
It’s the instinct to avoid to accept a definitive loss when there is still a chance of recovering it. This can lead to taking a riskier chance that might lead to an even…
Diminishing Sensitivity
pprospect-theory
According to the Diminishing Sensitivity bias, smaller changes are perceived as more important close to the reference level than changes further away from it.
This creates the characteristic s-shape of the Prospect Theory value function, i.e. concave in the gain domain above the x-axis (more likely to stop gambling when winning) but convex in the loss domain below it (more likely to keep gambling when losing).
NoteExample
The gambling table
In simple terms, winning the first 100€ when gambling feels more valuable than winning an additional 100€; so people are less likely to keep gambling for more. Similarly, losing the first 100€ feels more painful than losing an additional 100€; so, people don’t mind gambling to reverse losses.
Also relates to: Loss Aversion · Reference Dependence · Aversion to Ambiguity · Hyperbolic Discounting