Loss aversion and the EU referendum

eu-union-jack-flagsGiven the prevalence of the “loss aversion” cognitive bias, it should in theory be highly unlikely that the British population votes to leave the EU. As a refresher, here’s how Wikipedia defines it:

In economics and decision theory, loss aversion refers to people’s tendency to strongly prefer avoiding losses to acquiring gains. Most studies suggest that losses are twice as powerful, psychologically, as gains

The “out” camp have to persuade the electorate that leaving the EU will result in upside for them and the country. The “in” camp on the other hand need to focus on the benefits of the status quo and the risk of downside to the electorate and the country from leaving. Given the mechanics of loss aversion it should be very much easier for the latter than the former, especially against the backdrop of a split electorate.

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