In behavioral economics, the control premium refers to people’s willingness to forego potential rewards in order to control (avoid delegation) of their own payoffs. In an experiment, participants were asked to choose whether to bet on another person or themselves answering a quiz question correctly. Although individuals’ maximizing their rewards would bet on themselves in 56% of the decisions (based on their beliefs), they actually bet on themselves 65% of the time, suggesting an aggregate control premium of almost 10%. The average study participant was willing to sacrifice between 8 and 15% of expected earnings to retain control (Owens et al., 2014). (See also overconfidence.)

 

Owens, D., Grossman, Z., & Fackler, R. (2014). The control premium: A preference for payoff autonomy. American Economic Journal: Microeconomics, 6(4), 138-161.