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Daniel Kahneman proved that people are loss averse and got a Noble prize for it.

However, as poker players know, that doesn't seem right. If someone loses, that person is much more likely to take negative EV decisions to get even. Or go up in stakes to take higher risks.

Let's say you start with 100. You feel that the right amount to gamble is 10. But if you lost and your down to 80, suddenly you feel that 20 is the right amount to gamble. As most professionals and statisticians know, one should lover ones bet when total wealth/bankroll decreases.

Can someone explain how this goes hand in hand with Kahnemans prospect theory?

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Kahnemans theory is slightly more nuanced. You are actually supporting his evidence with your example as he found that people are more risk averse when they are winning and conversely they are more risk seeking when they are losing.

So in your example, when a player is losing they may be likely to take actions that in retrospect are more risky/uncertain than the situation merits. That fits well within the theory.

  • I haven't read their research paper and I haven't seen them say that people are risk avert unless they are on a loss. – MacProGirl Dec 4 '16 at 6:12
  • If you could give me that reference to where they state that I would be glad. Also, what sense those that make from an evolutionary psychology viewpoint? If losses are worse than the equal gain, why would that change if you are on a loss already? – MacProGirl Dec 4 '16 at 6:14
  • Here is the paper for you to read: Prospect Theory. Also, it's not clear to me what you're asking, but I'd like to answer if I can. Perhaps move this conversation to the Chat function if we are going to continue. Comments isn't best suited for this. Thanks. – Toby Booth Dec 4 '16 at 11:44
  • When I think of it, this might not have to do with prospect theory. Not sure. What I wanted to know is what evolutionary psychology has to say about people's urge to take on higher risk to get even when their losing. Let's say you start with 100. You feel that the right amount to gamble is 10. But if you lost and your down to 80, suddenly you feel that 20 is the right amount to gamble. I will edit the OP with this clarification. – MacProGirl Jan 7 '17 at 0:55

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