The reflection effect refers to the phenomenon where individuals display risk-averse behavior when facing potential gains and risk-seeking behavior when confronted with potential losses. This behavior illustrates how people evaluate choices based on their reference points, leading to asymmetrical responses in decision-making under uncertainty. The reflection effect highlights the importance of loss aversion, where losses loom larger than gains, and shows how people's preferences can shift dramatically depending on whether they perceive themselves as being in a gain or loss situation.
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