In a perfect world, tradeoffs are straightforward.
I give up on X, you give up on return on some Y valued similarly. Simple. Rational. Easy.
Loss aversion destroys this logic.
Loss aversion - Kahneman and Tversky 197x - shows that people value losses vastly more than their natural value.
I'll do vastly more try preserve my existing girlfriend, than to chase her has she been single. I'll ask vastly more for what I have than how much I would've paid to buy it.
Back to negotiations.
Suppose the UK asks the EU to give up on X (day freedom of movement), in return for whatever. Let's assume that the deal makes rational sense. (We ignore the strategic issues, have theoretic math etc)
For the EU, giving up on something is a loss. Losses are valued? Double their nominal value.
Hence, EU will ask the UK double the value in return.
Let's assume the required thing is money - for simplicity.
Say the EU says. Ok. No freedom of movement, but give £10bn yearly to the EU budget.
Now, for the UK this extra £10bn is perceived as a loss. Valued at double at £20bn
This explains why negotiating tradeoffs is so tough and usually just doesn't happen.
I am told that this idea has already been developed in a chapter by Kahneman and Tversky about conflict resolution, but I can't find the reference right now