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The Control Premium: A Preference for Payoff Autonomy

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  • 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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    Cited by:

    1. Wagner, Alexander K. & Granic, Dura-Georg, 2017. "Tie-Breaking Power in Committees," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168187, Verein für Socialpolitik / German Economic Association.
    2. repec:kap:jrisku:v:54:y:2017:i:3:d:10.1007_s11166-017-9259-x is not listed on IDEAS
    3. Afzal, Uzma & d Adda, Giovanna & Fafchamps, Marcel & Said, Farah, 2016. "Gender and Agency within the Household: Experimental Evidence from Pakistan," CEPR Discussion Papers 11464, C.E.P.R. Discussion Papers.
    4. Randolph Sloof & Ferdinand von Siemens, 2015. "Decision Initiation, Decision Implementation, and the Allocation of Decision Rights," CESifo Working Paper Series 5509, CESifo Group Munich.
    5. Björn Bartling & Ernst Fehr & Holger Herz, 2014. "The Intrinsic Value of Decision Rights," Econometrica, Econometric Society, vol. 82, pages 2005-2039, November.
    6. repec:kap:expeco:v:20:y:2017:i:3:d:10.1007_s10683-016-9499-7 is not listed on IDEAS
    7. repec:eee:joepsy:v:65:y:2018:i:c:p:41-59 is not listed on IDEAS
    8. repec:eee:jeborg:v:147:y:2018:i:c:p:1-12 is not listed on IDEAS
    9. Tomas Sjöström & Levent Ülkü & Radovan Vadovic, 2017. "Free to Choose: Testing the Pure Motivation Effect of Autonomous Choice," Carleton Economic Papers 17-11, Carleton University, Department of Economics.
    10. Silvia Dominguez Martinez & Randolph Sloof, 2016. "Communication versus (Restricted) Delegation: An Experimental Comparison," Tinbergen Institute Discussion Papers 16-050/VII, Tinbergen Institute.
    11. repec:kap:theord:v:85:y:2018:i:2:d:10.1007_s11238-017-9646-4 is not listed on IDEAS
    12. Dominguez-Martinez, Silvia & Sloof, Randolph & von Siemens, Ferdinand A., 2014. "Monitored by your friends, not your foes: Strategic ignorance and the delegation of real authority," Games and Economic Behavior, Elsevier, vol. 85(C), pages 289-305.
    13. Silvia Dominguez-Martinez & Randolph Sloof & Ferdinand von Siemens, 2010. "Monitoring your Friends, not your Foes: Strategic Ignorance and the Delegation of Real Authority," CESifo Working Paper Series 3172, CESifo Group Munich.
    14. Danz, David & Hüber, Frank & Kübler, Dorothea & Mechtenberg, Lydia & Schmid, Julia, 2013. "'I'll do it by myself as I knew it all along': On the failure of hindsight-biased principals to delegate optimally," Discussion Papers, Research Unit: Market Behavior SP II 2013-203, WZB Berlin Social Science Center.
    15. Randolph Sloof & Ferdinand A. Siemens, 2017. "Illusion of control and the pursuit of authority," Experimental Economics, Springer;Economic Science Association, vol. 20(3), pages 556-573, September.
    16. repec:eee:joepsy:v:67:y:2018:i:c:p:177-190 is not listed on IDEAS
    17. João V. Ferreira & Nobuyuki Hanaki & Benoît Tarroux, 2017. "On the Roots of the Intrinsic Value of Decision Rights: Evidence from France and Japan," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 2017-11, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
    18. David Danz & Dorothea Kübler & Lydia Mechtenberg & Julia Schmid, 2015. "On the Failure of Hindsight-Biased Principals to Delegate Optimally," Management Science, INFORMS, vol. 61(8), pages 1938-1958, August.
    19. repec:eee:pubeco:v:160:y:2018:i:c:p:117-131 is not listed on IDEAS
    20. David Danz & Frank Hüber & Dorothea Kübler & Lydia Mechtenberg & Julia Schmid, 2013. "‘I'll do it by myself as I knew it all along’: On the failure of hindsight-biased principals to delegate optimally," SFB 649 Discussion Papers SFB649DP2013-009, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.

    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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