Definition
Plain language
Kahneman and Tversky's finding that the same change matters more when you're starting from little than from a lot — the gap between ten and twenty dollars feels bigger than between a hundred-ten and a hundred-twenty.
As stated in the literature
A foundational decision-science framework whose diminishing-sensitivity principle describes a concave value curve — steep at low magnitudes, flat at high ones; rediscovered as a confirmed regularity by AutoCog's Diminishing Returns WADD model.
Why it matters: It explains why people respond to changes relative to where they start rather than in absolute terms, a pattern that shows up across real-world decisions about money and risk.
For example, going from owning nothing to owning ten dollars feels like a big jump, while going from a hundred-ten to a hundred-twenty dollars barely registers, even though both add ten dollars.