The effect of accountability on loss aversion

This paper investigates the effect of accountability—the expectation on the side of the decision maker of having to justify his/her decisions to somebody else—on loss aversion. Loss aversion is commonly thought to be the strongest component of risk aversion. Accountability is found to reduce the bias of loss aversion. This effect is explained by the higher cognitive effort induced by accountability, which triggers a rational check on emotional reactions at the base of loss aversion, leading to a reduction of the latter. Connections to dual-processing models are discussed.