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The intrinsic value of decision rights

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  • Björn Bartling
  • Ernst Fehr
  • Holger Herz

Abstract

Philosophers, psychologists, and economists have long argued that certain decision rights carry not only instrumental value but may also be valuable for their own sake. The ideas of autonomy, freedom, and liberty derive their intuitive appeal - at least partly - from an assumed positive intrinsic value of decision rights. Providing clean evidence for the existence of this intrinsic value and measuring its size, however, is intricate. Here, we develop a method capable of achieving these goals. The data reveal that the large majority of our subjects intrinsically value decision rights beyond their instrumental benefit. The intrinsic valuation of decision rights has potentially important consequences for corporate governance, human resource management, and optimal job design: it may explain why managers value power, why employees appreciate jobs with task discretion, why individuals sort into self-employment, and why the reallocation of decision rights is often very difficult and cumbersome. Our method and results may also prove useful in developing an empirical revealed preference foundation for concepts such as "freedom of choice" and "individual autonomy".

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Bibliographic Info

Paper provided by Department of Economics - University of Zurich in its series ECON - Working Papers with number 120.

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Date of creation: Apr 2013
Date of revision: Jun 2014
Handle: RePEc:zur:econwp:120

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Keywords: Decision rights; authority; private benefits of control;

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  1. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-58, December.
  2. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
  3. Owens, David & Grossman , Zachary & Fackler , Ryan, 2012. "The Control Premium: A Preference for Payoff Autonomy," University of California at Santa Barbara, Economics Working Paper Series qt5bg845s1, Department of Economics, UC Santa Barbara.
  4. Ernst Fehr & Holger Herz & Tom Wilkening, 2012. "The Lure of Authority: Motivation and Incentive Effects of Power," CESifo Working Paper Series 4021, CESifo Group Munich.
  5. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
  6. Oliver Hart & John Moore, 1994. "Debt and Seniority: An Analysis of the Role of Hard Claims in Constraining Management," NBER Working Papers 4886, National Bureau of Economic Research, Inc.
  7. Scott Stern, 2004. "Do Scientists Pay to Be Scientists?," Management Science, INFORMS, vol. 50(6), pages 835-853, June.
  8. Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 604-631, June.
  9. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  10. Casey Ichniowski & Kathryn Shaw, 2003. "Beyond Incentive Pay: Insiders' Estimates of the Value of Complementary Human Resource Management Practices," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 155-180, Winter.
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Cited by:
  1. Sabrina Jeworrek & Vanessa Mertins, 2014. "When Pay Increases are Not Enough: The Economic Value of Wage Delegation in the Field," IAAEU Discussion Papers 201408, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
  2. Daniela Grieco & Marco Faillo & Luca Zarri, 2013. "Top Contributors as Punishers," Working Papers 24/2013, University of Verona, Department of Economics.
  3. Colombo, Massimo G. & Mohammadi, Ali & Lamastra, Cristina Rossi, 2014. "Innovative business models for high-tech entrepreneurial ventures: the organizational design challenges," Working Paper Series in Economics and Institutions of Innovation 366, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  4. Randolph Sloof & Ferdinand von Siemens, 2014. "Illusion of Control and the Pursuit of Authority," CESifo Working Paper Series 4764, CESifo Group Munich.

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