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The Control Premium: A Preference for Payoff Autonomy

Author

Listed:
  • David Owens Jr.
  • Zachary Grossman Jr.
  • Ryan Fackler Jr.

Abstract

We document individuals' willingness to pay to control their own payoff. Experiment participants choose whether to bet on themselves or on a partner answering a quiz question correctly. Given participants' beliefs, which we elicit separately, expected-money maximizers would bet on themselves in 56.4 percent of the decisions. However, participants actually bet on themselves in 64.9 percent of their opportunities, reflecting an aggregate control premium. The average participant is willing to sacrifice 8 percent to 15 percent of expected asset-earnings to retain control. Thus, agents may incur costs to avoid delegating and studies inferring beliefs from choices may overestimate their results on overconfidence.

Suggested Citation

  • David Owens Jr. & Zachary Grossman Jr. & Ryan Fackler Jr., 2014. "The Control Premium: A Preference for Payoff Autonomy," American Economic Journal: Microeconomics, American Economic Association, vol. 6(4), pages 138-161, November.
    • Handle: RePEc:aea:aejmic:v:6:y:2014:i:4:p:138-61
    Note: DOI: 10.1257/mic.6.4.138
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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