The Framing Effect is the cognitive bias in which people react differently to the same information depending on how it is presented β whether it is framed as a gain or loss, in positive or negative terms, or emphasising different aspects of the same reality. Documented by Kahneman and Tversky (1981), it shows that choices are not driven purely by objective content but by the psychological context in which information is encountered.
Daniel Kahneman's Nobel Prize-winning framework for human judgment β fast and slow thinking, cognitive biases, Prospect Theory, and the experiencing vs. remembering self. The most cited work in behavioural economics, explained with practical applications.
Loss Aversion is the cognitive bias in which the psychological pain of losing something is roughly twice as powerful as the pleasure of gaining an equivalent amount. Documented by Daniel Kahneman and Amos Tversky (1979) as a core component of Prospect Theory, it explains why people are irrationally averse to certain losses, accept negative expected-value bets to avoid losses, and make dramatically different decisions depending on whether options are framed as gains or losses.