There has been a lot of talk about loss aversion lately in many different places. The housing market is a great example, with homeowners who need to sell their houses refusing to take less than their original purchase price, even though that "sunk cost" is totally irrelevant in today's market. Stock market investors have been doing it for decades, refusing to sell a stock for less than they paid. This is part of the basis for the entire field of technical analysis. These investors can predict huge volumes of buying and selling when a particular investment reaches a level where many people bought in.
Greg Mankiw today has a great example. Even a great financial economist, who can see himself falling victim to this bias, can't use a brilliant investing strategy that he himself invented because of the fear of a regretful situation (the basis for loss aversion).
And one of my favorite weekly comics has a great example from politics. (warning, if you click here after Oct 5, you will need to manually find the Sept 30 edition).
