
S E48: Behavioral Economics - We're only human!
Think Like An Economist
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Loss Ofversion - The Biggest Mistake in Making Decisions
Loss of version means that if i give you 50 dollars, the joy you get from it is smaller than the pain you'd feel if i took it away. This can really matter in the real world. There's good evidence that doctors make different decisions if you tell them that a treatment will help 90 % of people, then if you say it won't help ten%. Remember, you should always ignore sunk costs. They're sunk. Your decision needs to reflect the marginal costs and benefits that you fice now.
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