It has been shown that in certain situations losses exert a stronger effect on behavior than respective gains, and this has been commonly explained by the argument that losses are given more weight in people's decisions than respective gains. However, although much is understood about the effect of losses on cognitive processes and behavior, 2 major inconsistencies remain. First, recent empirical evidence fails to demonstrate that people avoid incentive structures that carry equivalent gains and losses. Second, findings in experience-based decision tasks indicate that following losses, increased arousal is observed simultaneously with no behavioral loss aversion. To account for these findings, we developed an attention-allocation model as a comprehensive framework for the effect of losses. According to this model losses increase on-task attention, thereby enhancing the sensitivity to the reinforcement structure. In the current article we examine whether this model can account for a broad range of empirical phenomena involving losses. We show that as predicted by the attentional model, asymmetric effects of losses on behavior emerge where gains and losses are presented separately but not concurrently. Yet, even in the absence of loss aversion, losses have distinct effects on performance, arousal, frontal cortical activation, and behavioral consistency. The attentional model of losses thus explains some of the main inconsistencies in previous studies of the effect of losses.

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The common view in psychology and neuroscience is that losses loom larger than gains, leading to a negativity bias in behavioral responses and Autonomic Nervous System (ANS) activation. However, evidence has accumulated that in decisions under risk and uncertainty individuals often impart similar weights to negative and positive outcomes. We examine the role of the ANS in decisions under uncertainty, and its consistency with the behavioral responses. In three studies, we show that losses lead to heightened autonomic responses, compared to equivalent gains (as indicated by pupil dilation and increased heart rate) even in situations where the average decision maker exhibits no loss aversion. Moreover, in the studied tasks autonomic responses were not associated with risk taking propensities. These results are interpreted by the hypothesis that losses signal the subjective importance of global outcome patterns.

According to self-maintenance theory, people notice their dishonest acts and thus experience ethical dissonance between their misconduct and their positive moral self. In this view, dishonesty is facilitated by justifications that redefine moral boundaries. By contrast, the bounded ethicality approach suggests that biased perception prevents people from becoming aware of their dishonesty. We tested the key process assumptions behind these accounts using pupillary responses and fixation data and found physiological evidence for both kinds of mechanisms. In particular, physiological arousal increased at the initial stage of cheating responses. This suggests that people are on some level aware of their wrongdoings. At the same time, however, we found attentional biases that can reduce the likelihood for detecting potentially disadvantageous information. We suggest that dishonest acts come at the internal cost of increased tension, which people aim to avoid by pre-emptive biased processing as well as post hoc justifications