Experimental evidence on project choice and accountability

We investigate how decision making is affected when the decider knows s/he is held accountable for the decision or the outcome. In a laboratory experiment, we analyze different treatments where agents have to choose a project from a set of investment opportunities. In one setting, agents face pressure to justify their project choice if profits become negative. In two other settings, agents either have to justify their decisions irrespective of the project outcome or dependent on a state of nature. We test hypotheses derived from a simple model and find support for them: accountability reduces the likelihood of the project with higher return and risk being chosen though the extent depends on the type of accountability. However, higher profit shares for the agent or a project recommendation by the principal can offset that effect to some extent. Our results have implications for controlling investment decisions.