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29.The Fourfold Pattern - Coggle Diagram
29.The Fourfold Pattern
Four-Part Model
- High Probability and Gains
- Prefer smaller, certain gain over larger potential gain
- Example: Settling a lawsuit
- High Probability and Losses
- Willing to risk larger loss over certain smaller loss
- Example: Risking everything in court
- Low Probability and Gains
- Prefer to take a small chance at larger gain
- Example: Gambling or lotteries
- Low Probability and Losses
- Prefer to insure against small risk of loss
- Example: Buying insurance
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Practical Implications
- Negotiations: Concessions undervalued due to loss aversion
- Reforms: Losses to certain groups outweigh benefits to the majority
- Market Behavior: Consumers may punish companies by reducing spending if prices are increased without justification
- Improving Decision Making
- Consider both rational analysis and psychological factors
- Use historical data to better estimate risks and costs in projects