The Intrinsic Value of Control: The Propensity to Under-Delegate in the Face of Potential Gains and Losses

Abstract

Human beings are often faced with a pervasive problem: whether to make their own decisions or to delegate decision tasks to someone else. Here, we test whether people are inclined to forgo monetary rewards in order to retain agency when faced with choices that could lead to losses and gains. In a simple choice task, we show that even though participants have all the information needed to maximize rewards and minimize losses, they choose to pay in order to control their own payoff. This tendency cannot be explained by participants’ overconfidence in their own ability, as their perceived ability was elicited and accounted for. Rather, the results reflect an intrinsic value for choice, which emerges in the domain of both gains and losses. Moreover, our data indicates that participants are aware that they are making suboptimal choices in the normative sense, but do so anyway, presumably for psychological gains.

Keywords: control premium, delegation, agency, decision rights, gains, losses

JEL Classification: C91, D03, D81