Further analysis of the intrinsic value of decision rights

Further'Analysis'of'the'Intrinsic'Value'of'Decision'

Rights

Jessica'Rountree 6181155 University.of.Amsterdam Faculty.of.Economics.and.Business Master.Thesis.MSc.Business.Economics Specialization.Organizational.Economics Supervisor:.Silvia.Dominguez.Martinez 15.ECTS Amsterdam,.10.July.2015

Abstract: Bartling.Fehr.and.Herz.(2014).established.that.decision.rights.are.intrinsically. valuable.beyond.their.instrumental.benefit..However,.contrary.to.their.hypothesis.they. find.that.this.intrinsic.value.is.negatively.correlated.with.conflict.of.interest..The. purpose.of.this.thesis.is.to.further.explore.their.results.in.an.experimental.setting...A. simplified.version.of.Bartling,.Fehr.and.Herz’s.(2014).experiment.is.conducted.in.a. classroom.setting..The.results.of.this.experiment.confirm.that.decision.rights.do.indeed. bear.an.intrinsic.value.above.their.instrumental.value.for.enforcing.a.preferred. outcome..Further,.the.results.of.this.experiment.demonstrate.that.increasing.the. asymmetry.of.effort.costs.results.in.a.higher.intrinsic.value.of.decision.rights..Finally,.an. attempt.is.made.to.find.a.correlation.between.the.subject’s.intrinsic.preference.for. decision.rights.and.their.score.on.the.Burger.Cooper.(1979).Desirability.of.Control.scale. but.unfortunately.the.results.are.inconclusive..

1. Introduction' ' Motivation( ( The.work.of.many.economists,.sociologists.and.philosophers.has.established.that. there.is.instrumental.value.to.be.found.in.decision.rights.(e.g..Aghion.and.Tirole. (1997)),.but.is.there.also.an.intrinsic.value?.Instrumental.value,.also.know.as.extrinsic. value,.measures.the.value.of.the.decision.right.as.a.means.of.achieving.a.preferred. outcome..The.instrumental.value.represents.the.actual.increase.to.an.individual’s.utility. as.a.result.of.being.allowed.to.make.the.choice.that.is.in.his.or.her.own.best.interest.. While.instrumental.value.represents.a.means.to.an.end,.intrinsic.value.is.an.end.in.itself. (Bernstein,.2001)..Intrinsic.value.is.the.increase.in.utility.that.comes.from.simply. holding.the.decision.right.regardless.of.the.outcome... .Throughout.history,.people.have.gone.to.great.lengths.to.gain.and.keep.control. over.their.own.choices..The.desire.of.liberty,.or.the.power.to.choose,.is.well.ingrained.in. each.of.us..Thomas.Jefferson.went.so.far.as.to.describe.liberty.as.an.“inalienable.right”. in.the.Declaration.of.Independence.(US.1776)...Intuitively.it.seems.that.there.must.be. an.intrinsic.value.to.be.found.in.making.one’s.own.choices,.but.only.relatively.recently. have.economists.and.psychologists.begun.to.measure.this.value.(e.g..Bartling,.Fehr.and. Herz.(2014),.Fehr,.Herz.and.Wilkening.(2013),.Owens,.Grossman.and.Fackler.(2014)).. Accurately.measuring.the.total.value.of.the.decision.right.is.necessary.in.order.to. determine.the.optimal.level.of.delegation.within.the.firm..Just.as.research.on.the. instrumental.value.of.decision.rights.has.shown.that.their.proper.allocation.can.be.used. to.induce.optimal.effort.levels.(Aghion.and.Tirole.(1997)),.understanding.how.the. intrinsic.value.of.decision.rights.affects.individual.effort.choices.is.key.to.fully. understanding.the.principal^agent.dilemma..The.standard.utility.function.as.described. in.Aghion.and.Tirole’s.(1997).model.certainly.includes.the.instrumental.value.of.the. decision.right,.but.it.may.be.necessary.to.include.an.intrinsic.value.component.as.well.. If.intrinsic.value.does.affect.utility.then.it.is.important.to.include.it.in.the.analysis.in. order.to.have.an.accurate.picture.of.the.total.utility.derived.from.the.decision.right..

Suppose.that.individuals.do.in.fact.derive.an.increase.in.utility.simply.by.holding. the.decision.right.regardless.of.the.outcome..If.this.is.the.case,.the.individual’s.overall. utility.is.higher.than.their.instrumental.value.alone..The.individual’s.utility.can.be. shown.as:. Instrumental(Value(+(Intrinsic(Value(=(Utility(of(Decision(Right( . The.combined.utility.derived.from.the.instrumental.and.intrinsic.values.of.the. decision.right.should.be.used.when.determining.whether.or.not.delegation.should. occur..If.the.intrinsic.value.is.positive,.then.the.agent.derives.a.higher.level.of.utility. from.the.decision.right.than.the.instrumental.value.alone..In.this.case,.optimal. allocation.of.the.decision.right.can.only.be.found.by.examining.the.total.utility.of.the. decision.right.(Instrumental(Value(+(Intrinsic(Value).for.each.party.involved... This.idea.is.supported.by.the.work.of.Frey,.Benz.and.Stutzer.(2004)..They.show. that.the.utility.function.does.in.fact.include.an.intrinsic.value.component.that.they.refer. to.as.‘procedural.utility’,.or.the.utility.gained.from.the.process.leading.to.a.particular. outcome.rather.than.the.outcome.itself..Their.paper.is.meant.to.introduce.the.concept. and.argue.that.it.should.be.better.integrated.into.economic.research..Bartling,.Fehr.and. Herz.(2014).take.this.concept.a.step.further.in.their.experiment... Bartling,.Fehr.and.Herz.(2014).are.among.the.first.to.explore.the.intrinsic.value. of.decision.rights.in.an.experimental.setting..Their.design.allows.for.the.separation.of. instrumental.value.from.intrinsic.value..Their.results.show.that.a.large.majority.of. subjects.exhibit.an.intrinsic.preference.for.the.decision.right.beyond.the.instrumental. value.. Furthermore,.Bartling,.Fehr.and.Herz.(2014).demonstrate.that.the.intrinsic. value.of.the.decision.right.decreases.in.response.to.an.increasing.degree.of.conflict.of. interest.between.the.Principal.and.the.Agent..They.expected.to.find.that.individuals. would.be.motivated.by.a.desire.to.gain.control.over.another.person,.and.that.this. motivation.would.increase.as.the.conflict.of.interest.rose..However,.the.results.were. surprisingly.the.opposite.of.the.authors’.expectations..Their.proposed.explanation.of. this.unexpected.finding.is.that.subjects.do.not.prefer.to.have.control.in.situations.where. there.is.conflict..Rather,.subjects.feel.good.about.themselves.when.their.actions.profit.

someone.else..This.explanation.is.supported.by.Hamman,.Loewenstein.and.Weber. (2009),.who.suggest.that.Principals.prefer.to.delegate.rather.than.take.responsibility. for.selfish.behaviors... In.order.to.further.examine.the.findings.of.Bartling,.Fehr.and.Herz.(2014),.I.will. run.a.modified.version.of.their.experiment..I.will.test.to.see.if.their.main.result.holds,. which.is.that.there.exists.an.intrinsic.value.of.decision.rights..Secondly,.I.will.explore. the.potential.impact.of.asymmetric.effort.costs.on.the.degree.to.which.decision.rights. are.intrinsically.valued..Finally,.I.will.test.to.see.if.an.individual’s.propensity.to. intrinsically.value.decision.rights.might.be.linked.to.his.or.her.score.on.the.Burger. Cooper.Desirability.of.Control.scale.(Burger.and.Cooper.(1979))... Contribution. My.experiment.might.help.to.provide.further.support.for.the.existence.of.an. intrinsic.value.of.decision.rights.as.demonstrated.by.Bartling,.Fehr.and.Herz.(2014).. Furthermore,.I.would.like.to.be.able.to.provide.some.insight.into.the.causes.and. determinants.of.this.intrinsic.value.component..Although.my.research.is.not.directly. related.to.conflict.of.interest,.perhaps.my.findings.will.offer.some.additional.insight.into. possible.explanations.for.the.counterintuitive.finding.of.Bartling,.Fehr.and.Herz.(2014). of.a.negative.correlation.between.conflict.of.interest.and.intrinsic.value.. Contrary.to.their.hypothesis,.Bartling,.Fehr.and.Herz.(2014).find.an.inverse. relationship.between.conflict.of.interest.and.intrinsic.value..They.define.conflict.of. interest.as.the.Principal’s.relative.payoff.difference.between.the.Principal’s.preferred. project.and.the.Agent’s.preferred.project..More.precisely,.they.use.the.formula. ! = (!_!! −!!_!)!/!(!_! −!!_!)!where.!_!.is.the.Principal’s.payoff.in.the.Agent’s.preferred.

project,.!!.is.the.Principal’s.payoff.in.the.outside.option,.and.!!.is.the.Principal’s.payoff.

in.the.Principal’s.preferred.project...

My.modified.version.experiment.will.hold.conflict.of.interest.constant.while. creating.asymmetries.in.the.effort.costs.of.the.Principal.and.Agent..In.terms.of.the. definition.above,.the.conflict.of.interest.in.my.experiment.will.remain.constant.between.

rounds..In.all.rounds.!_! = !100, !_! = 200.and.!_! = 250..These.values.will.be.discussed.

important.to.understand.that.they.are.constant.between.rounds..The.effort.costs.for.the. Agent.in.my.experiment.are.decreasing.between.rounds..In.the.experiment.by.Bartling,. Fehr.and.Herz.(2014),.the.costs.varied.between.rounds.but.were.always.fully. symmetrical.in.every.round.between.the.Principal.and.the.Agent..In.my.setup,.the. asymmetric.effort.costs.will.cause.the.payoff.to.the.Agent.to.become.higher.if.he.or.she. were.to.choose.the.same.effort.level.throughout.each.of.the.five.rounds..The.payoff.to. the.Principal.will.not.change... Because.the.payoffs.to.the.Principal.will.not.change.between.rounds,.reducing. the.effort.costs.of.the.Agent.should.not.affect.the.delegation.decision.of.a.rational. Principal..The.reason.is.that.in.the.experiment.the.Principal.sets.a.minimum.required. effort.level.for.delegation..If.the.Agent.chooses.a.higher.level.than.the.minimum. required.effort.level,.then.the.decision.rights.are.delegated,.otherwise.the.Principal. keeps.the.decision.rights..As.will.be.explained.in.the.experimental.design.section,.the. choice.of.the.minimum.required.effort.level.is.only.affected.by.the.Principal’s.effort. costs.and.not.by.the.Agent’s.effort.costs..Therefore,.as.the.costs.of.effort.remain.the. same.for.the.Principal.in.the.different.rounds,.the.minimum.required.effort.level.for. delegation.should.also.be.the.same.in.the.different.rounds.of.the.experiment... I.am.interested.in.seeing.whether.the.change.in.effort.costs.of.the.Agent.affects. the.intrinsic.value.of.decision.rights..As.there.is.only.limited.research.measuring.the. intrinsic.value.of.decision.rights,.the.direction.of.relationship.is.unclear..On.the.one. hand,.lower.effort.costs.could.be.interpreted.as.a.reduction.in.the.conflict.of.interest..If. a.Principal.decides.to.delegate.the.decision.rights.to.the.Agent,.then.the.lower.the. Agent’s.costs,.the.more.effort.he.or.she.will.exert,.and.the.more.likely.it.is.that.the. project.will.be.successful..This.is.the.theory.suggested.by.Bartling,.Fehr.and.Herz. (2014)..They.suggest.that.the.Principals.prefer.making.choices.that.benefit.others,.and. they.avoid.making.decisions.that.are.harmful.to.others..On.the.other.hand,.the.Principal. may.exhibit.inequity^averse.preferences.(Fehr.and.Schmidt.(2004))..If.that.is.the.case,. these.inequity.averse.preferences.may.reduce.the.likelihood.of.delegation.in.response. to.reductions.in.the.Agent’s.costs.relative.to.those.of.the.Principal..Additional.literature. supporting.both.of.these.theories.will.be.discussed.later.in.this.paper...

Bartling,.Fehr,.and.Herz.(2014).hypothesize.that.the.intrinsic.value.of.decision. rights.should.increase.with.the.conflict.of.interest.although.they.find.opposing.results.. Linking.their.hypothesis.to.my.research.design.should.be.done.with.caution..Following. the.definition.of.conflict.of.interest.by.Bartling,.Fehr.and.Herz.(2014).denoted.as.!,.the. conflict.of.interest.in.my.experiment.does.not.change..On.the.other.hand,.the.change.in. effort.costs.results.in.inequality.between.the.payoffs.of.Principal.and.Agent..This. inequality.could.affect.the.results.either.positively.or.negatively,.depending.on.the. inequity.aversion.of.the.Principal..The.possibilities.are.discussed.later.on.in.this.paper.. In.addition.to.testing.the.effect.of.asymmetric.effort.costs,.I.will.include.a.test. within.the.experiment.to.determine.each.subject's.degree.of.preference.for.control. according.to.the.Burger.Cooper.(1979).Desirability.of.Control.scale..This.scale.has.been. cited.in.many.studies.since.1979.as.a.measure.of.an.individual’s.intrinsic.preference.for. control.(e.g..Owens,.Grossman.and.Fackler.(2014))..The.scale.has.been.shown.to.have. significant.internal.consistency.(.80).and.test^retest.reliability.(.75).(Burger.and.Cooper. (1979))..If.subjects.demonstrate.a.higher.than.average.score.on.the.scale,.I.expect.them. to.also.demonstrate.higher.than.average.intrinsic.value.of.the.decision.right,.and.vice. versa..If,.on.average,.the.subject’s.Burger.Cooper.(1979).scores.do.align.with.the.degree. to.which.they.intrinsically.value.decision.rights.then.the.score.adds.credence.to.the.idea. that.the.effect.observed.is.in.fact.the.intrinsic.value.of.the.decision.right.that.stems.from. an.innate.preference.for.control.. This.revised.version.of.Bartling,.Fehr.and.Herz’.(2014).experiment.comes.with.a. new.set.of.potential.benefits.and.limitations..A.number.of.simplifications.were.required. in.order.to.run.this.experiment.in.a.classroom.setting.with.younger.subjects..The. experiment.was.shortened.from.10.rounds.to.5,.the.instructions.were.rewritten.in. order.to.avoid.the.use.of.complicated.terms.that.the.younger.subjects.may.not. understand,.and.the.second.part.of.the.original.experiment.was.omitted.entirely..These. simplifications.may.somewhat.limit.the.inferences.that.can.be.made.from.the.resulting. data.set... However,.the.scope.of.my.experiment.is.also.far.narrower.than.that.of.Bartling,. Fehr.and.Herz.(2014)..Their.experimental.results.were.used.not.only.to.prove.the. existence.of.the.intrinsic.value.component.but.also.to.test.for.a.number.of.potential.

complicating.factors..They.looked.at.the.potential.impact.of.stake.size,.and.they.ran. additional.checks.for.robustness..My.research.questions.are.more.targeted..Even. though.the.scope.of.my.experiment.is.more.limited.than.that.of.Bartling.et.al..(2014),. my.narrow.focus.should.allow.me.to.find.adequate.data.even.though.my.subjects.are. younger.and.the.time.allotted.for.the.experiment.is.much.shorter..Further.explanations. of.these.modifications,.benefits.and.limitations.can.be.found.in.the.discussion.of.the. experimental.procedures... In.the.following.section.of.this.paper,.I.will.outline.the.specific.research. questions.to.be.addressed.with.this.experiment..After.that,.I.will.discuss.literature.that. is.relevant.to.these.research.questions,.followed.by.an.overview.of.the.experimental. design.and.a.formulation.of.hypotheses..In.the.following.section.I.will.analyze.the. theoretical.predictions.of.the.experiment.and.outline.the.procedures.to.be.followed.. The.final.section.will.then.cover.the.results.found.in.the.experiment..This.paper.will. conclude.with.a.discussion.of.the.possible.explanations.and.limitations.of.the.results.of. this.experiment.. Research(Questions The.results.of.my.revised.version.of.the.experiment.may.serve.to.reaffirm.the. existence.of.an.intrinsic.value.component.in.the.delegation.decision.and.offer.new. insight.into.factors.affecting.this.intrinsic.value..With.that.goal.in.mind,.my.revised. version.of.Bartling,.Fehr.and.Herz’.(2014).experiment.will.attempt.to.answer.the. following.research.questions:. Research'Question'1:'What.is.the.effect.of.asymmetric.effort.costs.on.the. intrinsic.value.of.decision.rights? The.limited.research.measuring.intrinsic.value.of.decision.rights.makes.it. difficult.to.predict.the.direction.of.the.relationship.between.asymmetric.effort.costs.and. intrinsic.value..It.is.possible.that.the.subjects.will.perceive.the.increasing.asymmetry.in. effort.costs.as.an.increase.in.the.conflict.of.interest..Bartling,.Fehr.and.Herz.(2014). showed.a.negative.correlation.between.conflict.of.interest.and.intrinsic.value...

.Research'Question'2:'Is.the.degree.to.which.a.person.intrinsically.values. decision.rights.correlated.with.his.or.her.score.on.the.Burger.Cooper.Desirability.of. Control.scale? I.expect.to.find.a.positive.correlation.between.the.Burger.Cooper.score.and. intrinsic.value.of.decision.rights..Owens,.Grossman.and.Fackler.(2014).previously. showed.that.a.high.Burger.Cooper.score.is.linked.to.a.propensity.to.control.in.a. Principal^Agent.game..If.confirmed,.this.finding.will.lend.further.support.for.the.idea. that.individuals.value.decision.rights.intrinsically..A.positive.correlation.will.indicate. that.the.intrinsic.value.of.the.decision.right.may.be.related.to.an.innate.desire.for. control.. Related(Literature As.mentioned.earlier.the.instrumental.value.is.defined.as.the.increase.in.utility. caused.by.using.the.decision.right.to.enforce.a.preferred.outcome.while.intrinsic.value. refers.to.the.increase.in.utility.found.by.merely.holding.the.decision.right.regardless.of. the.outcome.(Bernstein,.2001)..It.is.important.to.look.at.both.instrumental.and.intrinsic. value.in.order.to.get.an.accurate.estimation.of.the.overall.value.of.the.decision.right.. Without.both.of.these.components,.the.utility.of.the.decision.right.may.be. underestimated.. Contrary.to.intrinsic.value,.the.instrumental.value.of.decision.rights.has.been. well.documented..Aghion.and.Tirole.(1997).created.a.model.that.shows.the.importance. of.the.allocation.of.decision.rights.in.affecting.the.behaviors.of.both.the.Principal.and. the.Agent.within.a.firm..In.their.model,.a.Principal.and.an.Agent.may.implement.a. project..There.are.several.possible.projects.that.can.be.implemented.each.with.varying. payoffs.for.the.Principal.and.the.Agent..There.is.at.least.one.project.that.results.in.a. negative.payoff.for.either.party..Therefore.both.parties.have.a.motivation.to.exert.effort. towards.collecting.information.so.that.they.can.implement.the.project.that.results.in.the. highest.payoff... The.utility.function.of.either.party.is.dependent.upon.which.party.holds.the. formal.decision.right,.the.Principal.or.the.Agent..Aghion.and.Tirole.(1997).create.a. separation.between.the.concepts.of.formal.and.real.authority..The.difference.between.

the.two.types.of.authority.stems.from.the.information.collected.by.each.party..Suppose. that.there.is.centralization,.so.the.Principal.has.the.formal.authority.and.can.overrule. the.Agent..Assume.that.the.Principal.chooses.not.to.exert.any.effort.while.the.Agent. exerts.enough.effort.to.collect.complete.information.on.all.project.options..In.this.case,. the.Principal.is.better.off.agreeing.with.whatever.suggestion.is.made.by.the.Agent..The. suggestion.made.by.the.Agent.may.not.be.the.Principal’s.first.choice,.but.it.will.also.be.a. non^negative.choice..If.the.Principal.chooses.blindly.then.he.or.she.may.end.up. implementing.the.option.with.the.negative.payoff.for.both.parties..In.this.scenario,.the. Principal.holds.formal.authority.but.the.Agent.has.the.real.authority.because.of.the. information.he.or.she.has.collected..My.experiment.will.focus.on.the.delegation.of. formal.authority..In.my.design,.the.payoffs.for.the.project.choices.will.be.given.in. advance.and.therefore.no.information.seeking.is.required.in.order.to.determine.which. project.offers.the.higher.payoff.for.either.party.. Aghion.and.Tirole.(1997).discuss.two.main.benefits.of.delegating.formal. authority.to.the.Agent..First.of.all,.delegating.authority.increases.the.amount.of.effort. that.the.Agent.is.willing.to.exert..When.the.Principal.has.formal.authority,.there.is. always.a.chance.that.he.or.she.may.overrule.the.Agent..The.Agent.will.experience. disutility.from.exerting.costly.effort.only.to.be.overruled..Therefore.delegating.formal. authority.to.the.Agent.assures.the.Agent.that.he.or.she.will.not.be.overruled.and.thus. the.Agent.is.more.likely.to.exert.more.effort..Secondly,.delegating.decisions.that.matter. more.to.the.Agent.than.to.the.Principal.will.encourage.the.Agent’s.participation..The. cost.of.delegation.is.the.Principal’s.loss.of.control.over.the.project.choice.. The.utility.functions.of.each.party.the.Aghion.and.Tirole’s.(1997).model.are. affected.by.the.allocation.of.formal.authority..If.there.is.centralization.(the.Principal. holds.formal.authority).then.the.Principal’s.utility.can.be.shown.as.!!! = !" + 1 − ! !"# −!!_!(!).where.!.represents.the.probability.that.the.Principal.is.informed. and.therefore.chooses.his.or.her.own.preferred.project,.!.is.the.payoff.to.the.Principal. of.his.or.her.own.preferred.project,.(1 − !).represents.the.probability.that.the.Principal. is.uninformed,.!.represents.the.probability.that.the.Agent.is.informed.and.suggests.his. or.her.own.preferred.project,.!".is.the.payoff.to.the.Principal.of.the.Agent’s.preferred. project,.and.!_!(!).represents.the.effort.costs.of.the.Principal..Similarly,.the.Agent’s. utility.in.the.event.that.the.Principal.holds.formal.authority.is.shown.as.!_!! = !"# +

1 − ! !" −!!!(!),.which.is,.with.probability.!.the.Principal.is.informed.and.chooses. his.or.her.own.preferred.project.which.gives.the.Agent.a.payoff.of.!",.with.probability. 1 − ! !the.Principal.is.uninformed,.!.is.the.probably.that.the.Agent.is.informed,.!.is.the. payoff.to.the.Agent.of.his.or.her.own.preferred.project,.and.!!(!).is.the.Agent’s.cost.of. effort..Under.delegation.of.formal.authority,.these.utility.functions.become.!_!! _{= !"# +} 1 − ! !" − !_! ! !for.the.Principal.and.!_!! _{= !" + 1 − ! !"# − !} ! ! .for.the.Agent... The.impact.of.changes.in.effort.costs.can.be.determined.by.maximizing.these. utility.functions..For.example,.when.the.Principal’s.effort.costs.increase,.the.Principal. likely.will.exert.less.effort,.reducing.the.chances.that.he.or.she.will.become.informed.. With.less.information,.the.Principal.is.less.likely.to.be.able.to.choose.the.project.with. the.highest.payoff..On.the.other.hand,.the.Principal.will.be.less.likely.to.intervene.with. the.work.of.the.Agent.due.to.the.increase.in.effort.costs..Therefore.the.Agent.will.likely. exert.more.effort,.which.in.turn.raises.the.Principal’s.expected.payoff..Overall,.it.is.clear. that.a.change.in.effort.costs.will.impact.utility.of.both.Principal.and.Agent..However,.the. direction.of.the.impact.is.ambiguous.due.to.these.two.competing.factors.. The.utility.functions.of.Aghion.and.Tirole’s.(1997).model.have.important. implications.for.my.experiment.beyond.their.use.as.a.tool.for.examining.the.effect.of. changes.in.effort.costs..The.values.!.for.the.Principal.and.!.for.the.Agent.are.meant.to. represent.the.payoff.achieved.by.implementing.the.respective.party’s.own.preferred. project..However,.the.benefits.of.implementing.one’s.own.preferred.project.might. exceed.instrumental.gain.envisioned.by.Aghion.and.Tirole.(1997)..If.there.is.an.intrinsic. value.component.to.the.decision.right,.then.it.should.be.included.in.the.values.for.!.and. !.in.order.to.find.the.optimal.level.of.delegation..Failure.to.include.the.intrinsic.value. component.may.result.in.an.underestimation.of.the.total.utility.that.results.from.having. the.decision.right.. Fehr,.Herz.and.Wilkening.(2013).adjust.the.theoretical.model.of.Aghion.and. Tirole.(1997).in.order.to.test.the.theoretical.predictions.with.a.laboratory.experiment.. As.in.the.Aghion.and.Tirole.model,.the.Principal.or.the.Agent.has.formal.authority..The. parties.will.gather.information.and.one.project.may.be.implemented... Fehr,.Herz.and.Wilkening.(2013).found.two.main.results:.1).Individuals.prefer.to. retain.authority.even.when.delegation.is.in.their.best.interest,.and.2).The.party.that.has.

authority.tends.to.exert.more.than.optimal.effort.while.the.party.without.authority. exerts.less.than.optimal.effort..The.authors.suggest.that.their.results.can.be.largely. explained.by.regret.aversion..They.define.regret.aversion.as.the.idea.that.subjects. experience.disutility.from.the.regret.that.arises.due.to.comparing.their.actual.outcomes. with.the.other.possibilities.that.might.have.been.achieved.given.different.choices... Fehr,.Herz.and.Wilkening.(2013).postulate.that.the.reason.for.the.Principal.to. refuse.delegation.even.when.it.is.profitable.could.stem.from.an.anticipation.of.being. overruled..A.Principal.is.overruled.if.he.or.she.delegates.authority,.but.both.parties.find. their.preferred.project..Then,.as.the.Agent.holds.the.decision.right,.the.Agent.will. implement.his.or.her.own.preferred.project..As.the.Principal.is.informed.about.his. preferred.project,.he.or.she.might.experience.a.decrease.in.utility.of.being.overruled. and.not.being.able.to.implement.his.preferred.project..The.results.of.Fehr.et.al..(2013). show.that.Principals.who.are.overruled.in.one.round.are.less.willing.to.delegate.in.the. next.round..Therefore.a.disutility.of.being.overruled.does.seem.to.be.a.factor.in.the. delegation.decision..A.potential.source.of.this.disutility.according.to.the.authors.is. regret.aversion... My.experiment.as.described.in.this.paper.does.not.allow.for.the.Principal.to.be. overruled,.so.my.results.will.not.be.complicated.by.the.possibility.and.resulting. disutility.of.being.overruled..In.my.design,.it.is.automatically.assumed.that.the.party. with.the.decision.right.will.attempt.to.implement.the.project.that.yields.them.the. highest.payoff..It.is.not.necessary.to.collect.information.in.order.to.determine.which. project.should.be.implemented..Rather,.the.amount.of.effort.exerted.will.determine.the. likelihood.that.the.project.is.successful..Furthermore,.in.my.experiment.there.is.no. communication.between.Principal.and.Agent.so.there.is.no.opportunity.for.either.party. to.know.whether.or.not.they.were.overruled.and.therefore.it.is.impossible.for.them.to. feel.disutility.of.being.overruled... In.summary,.Fehr,.Herz.and.Wilkening.(2013).demonstrated.that.authority.has. significant.effects.on.motivation..Using.the.model.developed.by.Aghion.and.Tirole. (1997),.they.show.that.the.controlling.party.tends.to.provide.more.than.optimal.levels. effort..The.controlled.party.provides.less.than.optimal.effort.levels..Therefore.the.

delegation.of.authority.seems.to.be.an.important.tool.affecting.motivation.beyond.the. instrumental.value.of.the.decision.rights... The.benefits.to.delegation.are.seen.in.the.work.of.Fehr,.Herz.and.Wilkening. (2013),.while.Falk.and.Kosfield.(2006).examine.the.opposite.case..That.is,.keeping. control.by.not.delegating.decision.rights.might.entail.hidden.costs..Falk.and.Kosfeld. (2006).analyze.the.interaction.between.control.and.incentives..They.conducted.an. experiment.in.which.the.Principal.first.decides.whether.to.control.the.Agent.or.not,.and. then.the.Agent.decides.how.much.effort.to.exert..The.Principal.can.control.the.Agent.by. setting.a.minimum.required.effort.level..Alternatively.the.Principal.can.decide.not.to. control.the.Agent.by.not.imposing.a.minimum.required.effort.level..A.selfish.Agent.is. predicted.to.choose.a.lower.effort.level,.when.not.controlled.as.compared.to.the. situation.where.he.is.controlled... Falk.and.Kosfeld.(2006).show.that.Agents.do.not.strictly.choose.the.minimum. values.of.effort.in.order.to.maximize.their.own.payoffs..Rather,.when.they.are.not. controlled.they.exert.more.effort..For.example,.in.one.treatment.group.67%.of.the. Agents.who.were.not.controlled.choose.a.level.of.effort.larger.than.10..Of.the.group.that. was.controlled,.only.30%.choose.a.level.of.effort.larger.than.10.when.the.minimum. required.effort.level.under.control.equals.5..The.results.throughout.all.treatments. follow.a.very.similar.pattern..Agents.who.are.not.controlled.will.choose.a.higher.level.of. effort.than.those.who.are.controlled.by.means.of.a.minimum.effort.requirement.. Controlling.the.behavior.of.the.Agents.actually.reduces.their.effort.levels..In.my. experiment.only.the.effort.exerted.by.the.party.with.the.decision.rights.affects.the. payoffs..Therefore,.the.hidden.costs.of.control.should.not.affect.my.results... Charness.et.al..(2012).investigate.whether.or.not.the.decision.to.delegate.the. wage.decision.to.workers.influences.the.worker’s.effort..They.found.inspiration.for. their.experiment.from.the.Brazilian.manufacturing.company.Semco..Semco. implemented.a.novel.method.of.making.payroll.decisions.in.which.the.employees. actually.choose.their.own.salaries.and.working.hours..Everyone.in.the.company.knows. what.the.others.earn,.and.the.salary.must.be.based.on.the.market.value.of.the.skills.and. education.of.the.individual..Even.so,.a.great.deal.of.control.is.given.to.the.employee.to.

make.his.or.her.own.decisions..According.to.Charness.et.al..(2012),.this.has.turned.out. to.be.a.very.profitable.business.model.for.Semco.. Charness.et.al..(2012).applied.the.idea.of.allowing.employees.to.set.their.own. hours.and.wages.in.an.experimental.setting.in.order.to.better.understand.and.measure. the.value.of.delegation..The.results.of.their.experiment.show.that.subjects.exert. significantly.more.effort.when.the.wage.decision.is.delegated..The.average.wage.was. also.much.higher.when.the.subjects.were.permitted.to.choose.the.wage.themselves.. Even.so,.after.controlling.for.the.possible.motivational.effects.of.the.higher.wage,. workers.still.exerted.more.effort.in.the.case.where.they.were.allowed.to.make.their. own.decisions... The.positive.effect.of.delegating.the.wage.decision.cannot.be.explained.by. reciprocity..Rather,.Charness.et.al..(2012).suggest.that.the.agents.perceive.the. delegation.of.authority.as.an.increase.in.their.autonomy.and.control..The.results.show. that.there.might.exist.hidden.advantages.of.delegation..Hence,.a.Principal.might.miss. out.on.benefits.by.keeping.too.much.control.and.delegating.too.little..These.results. demonstrate.the.importance.of.incorporating.the.motivational.benefits.of.decision. rights.into.the.delegation.decision.. Owens,.Grossman.and.Fackler.(2014).provide.support.for.the.existence.of.an. intrinsic.value.of.decision.rights.in.an.experimental.setting..They.refer.to.preferences. for.control.as.the.‘control.premium’,.defined.as.the.monetary.cost.that.a.person.is. willing.to.incur.in.order.to.have.control.over.their.own.payoffs..The.concept.of.the. control.premium.is.almost.identical.to.that.of.intrinsic.value..A.primary.difference.lies. in.the.manner.in.which.beliefs.are.elicited... Owens.et.al..(2014).elicited.beliefs.from.subjects.by.conducting.an.experiment.in. which.participants.were.required.to.choose.between.being.paid.for.answering.quiz. questions.correctly.and.being.paid.when.their.partner.would.answer.questions. correctly..The.experimental.setup.was.as.follows..In.Part.1,.participants.were.first. allowed.to.preview.the.questions.from.both.their.own.quiz.and.that.of.their.partner.. After.previewing.the.question.briefly,.the.subject.was.asked.to.rate.the.percentage. chance.that.he.or.she.would.be.able.to.answer.each.question,.and.the.percentage.chance. that.their.partner.would.be.able.to.answer.the.question..In.Part.2,.each.participant.

decided.whether.to.be.paid.for.each.question.based.on.their.own.answer.or.that.of.their. partner..Then.in.Part.3.the.subjects.actually.completed.the.quiz..Part.4.included.a. questionnaire.and.the.Burger.Cooper.(1979).Desirability.of.Control.test.. The.experimenters.controlled.for.ambiguity.regarding.the.skill.level.of.the. partner.by.creating.three.groups:.Baseline,.Reduced.Ambiguity.and.Minimal.Ambiguity.. In.the.Baseline.group,.the.only.information.that.the.subjects.had.in.order.to.come.up. with.the.percentage.chance.that.their.partner.would.answer.correctly.was.the.question. itself..In.the.Reduced.Ambiguity.group,.the.subject.was.shown.their.match’s.own.stated. likelihood.of.answering.the.question.correctly..In.the.Minimal.Ambiguity.condition,.the. subjects.were.shown.1).an.indication.of.their.match’s.quiz^taking.ability.based.on.a. preliminary.quiz.taken.at.the.start.of.the.experiment,.2).an.indication.of.the.difficulty. level.of.the.question.itself.based.on.the.number.of.people.that.previously.answered.it. correctly,.and.3).the.same.information.provided.in.the.Reduced.Ambiguity.group,.which. is.the.match’s.stated.likelihood.of.answering.correctly... The.main.result.of.the.experiment.indicates.that.a.control.premium.does.exist.. However.the.findings.regarding.the.three.different.ambiguity.groups.are,.well,.a.bit. ambiguous..There.are.mixed.results.regarding.the.impact.of.a.decrease.in.ambiguity.on. the.control.premium..Even.so,.Owens.et.al..(2014).are.able.to.conclude.that.a.desire.for. control.does.have.a.significant.impact.on.the.choices.made.in.this.experiment. regardless.of.attitudes.towards.ambiguity..Even.after.adjusting.for.the.effects.of. overconfidence,.their.results.show.that.a.control.premium.exists.that.is.equal.to.8%.to. 15%.of.expected.earnings..That.is,.subjects.are.willing.to.pay.8^15%.of.their.expected. earnings.in.order.to.be.the.one.answering.the.question.. Owens,.Grossman.and.Fackler.(2014).used.the.Burger.Cooper.(1979). Desirability.of.Control.scale.to.measure.a.subject’s.preference.for.autonomy..Their. results.show.that.subjects.with.high.Burger.Cooper.scores.are.willing.to.pay.higher. control.premiums.and.they.are.significantly.more.prone.to.overconfidence.than.those. with.low.Burger.Cooper.scores..The.results.found.by.Owens,.Grossman.and.Fackler. (2014).indicate.that.preferences.for.control.significantly.influence.the.decision.of. whether.or.not.delegation.will.occur...

Owens,.Grossman.and.Fackler.(2014).seem.to.be.the.first.to.use.the.Burger. Cooper.(1979).test.in.an.economics.experiment,.but.the.test.has.been.used.many.times. in.psychology.as.a.measure.of.the.degree.to.which.an.individual.values.control..For. example,.Gebhardt.and.Brosschot.(2002).tested.1044.Dutch.subjects.using.the.Burger. Cooper.scale..They.find.that.the.Burger.Cooper.scale.is.a.psychometrically.accurate.tool. for.measuring.control.preferences...Prince.and.Arias.(2007).used.the.Burger.Cooper. scale.to.analyze.preferences.for.control.among.men.with.a.history.of.domestic.violence.. Their.results.showed.that.the.Burger.Cooper.test.had.a.test^retest.reliability.of..75.over. a.six^week.period,.indicating.that.it.is.a.fairly.stable.test.of.preferences..The.work.of. Burger.and.Cooper.(1979).has.been.cited.hundreds.of.times.in.psychology.journals.and. so.it.seems.to.be.generally.accepted.as.a.reasonable.tool.for.measuring.the.degree.to. which.an.individual.prefers.to.have.control.over.his.or.her.own.decisions.. In.summary,.while.these.aforementioned.studies.have.contributed.significantly. to.the.determination.of.whether.or.not.an.intrinsic.value.of.decision.rights.exists,.their. implications.on.the.situational.determinants.of.the.size.of.the.intrinsic.value.are.limited.. I.hope.to.be.able.to.offer.some.insight.into.the.degree.of.impact.that.changes.in.effort. costs.might.have.on.the.intrinsic.value.of.decision.rights..The.project.choice.in.my. experimental.design.is.not.affected.by.effort.costs.since.no.information.collection.is. required..Therefore,.my.simplified.versions.of.the.utility.functions.based.on.Aghion.and. Tirole.(1997).and.Bartling,.Fehr.and.Herz.(2014).should.allow.me.to.measure.changes. in.the.delegation.decision.resulting.from.variations.in.effort.costs..Furthermore,.I.hope. to.be.able.to.show.that.the.Burger.Cooper.(1979).is.a.useful.predictor.of.the.degree.to. which.subjects.intrinsically.value.decision.rights..The.next.section.of.this.paper.will. explain.how.I.plan.to.collect.this.information.in.an.experimental.setting.. 2.'Methodology' Experimental(Design The.experiment.was.completed.in.two.parts..In.Part.1,.the.subjects.completed. five.rounds.based.loosely.on.the.Bartling,.Fehr.and.Herz.(2014).experiment.with. several.important.modifications..In.each.of.the.five.rounds,.the.Principal.was.matched. with.a.different.Agent.and.the.pair.had.the.opportunity.to.complete.a.project..In.Part.2,. the.subjects.answered.the.Burger.Cooper.(1979).Desirability.of.Control.test...

The.order.of.events.in.Part.1.of.the.experiment.is.shown.in.Figure.1.below..First,. the.Agent.chose.a.binding.number.of.hours.to.work..At.the.same.time,.the.Principal. chose.the.minimum.that.the.Agent.must.have.chosen.in.order.for.delegation.to.occur.. The.Principal.then.proceeded.to.choose.the.number.of.hours.that.he.or.she.would.work. in.the.event.that.delegation.did.not.occur..Finally,.the.choices.of.the.players.were. implemented..The.final.outcome.of.the.round.chosen.for.payment.was.determined.by. the.roll.of.a.dice.at.the.end.of.the.game..If.the.implemented.hours.worked.were.greater. than.or.equal.to.the.numbers.on.the.dice,.then.the.project.was.a.success..If.not,.the. project.was.a.failure..Payments.were.made.accordingly. t(=(1.1( ( t(=(1.2. t(=(2. t(=(3. The.agent.chooses.a. binding.number.of.hours. to.work.. Simultaneous.to.the. agent’s.choice,.the. principal.sets.the. minimum.hours.worked. required.for.delegation.. Without.knowing.the. delegation.outcome,.the. principal.chooses.a. binding.number.of.hours. to.work.in.case.he.or.she. retains.the.decision.right.. The.decision.right.is. delegated.or.not..The. choices.of.the.player.who. hold.the.decision.right.are. implemented..The.success. or.failure.of.the.project.is. determined..

FIGURE 1: The order of events in the delegation game. (Based on Bartling, Fehr and Herz, 2014 (p. 2012).

. The.project’s.success.is.determined.by.the.number.of.hours.worked,.and.either. party.(but.not.both).can.exert.effort..Each.subject.can.choose.to.work.between.0.and. 100.hours.on.each.project..The.number.of.hours.worked.directly.corresponds.to.the. probability.of.success.of.the.project,.i.e..10.hours.worked.=.10%.probability.of.success,. 75.hours.worked.=.75%.probability.of.success,.and.so.on..The.payouts.of.both.parties. are.determined.by.the.success.or.failure.of.the.project.and.the.costs.incurred.. The.key.difference.in.my.setup.from.the.of.Bartling,.Fehr.and.Herz.(2014).is.that. effort.costs.for.the.agent.will.vary.between.rounds.but.all.other.payoff.amounts.will. remain.the.same...The.participants.were.given.printed.lists.of.the.costs.and.payoffs.for. each.round..These.lists.can.be.found.in.Appendix.3..The.only.variation.between.the. rounds.is.the.cost.of.effort.for.the.Agent..The.costs.for.both.Principal.and.Agent.were. listed.on.the.left.side.of.their.Cost/Payoff.Sheet.in.order.to.draw.the.subject’s.attention. to.these.figures..Additionally,.participants.received.the.Cost/Payoffs.Sheets.for.all. rounds.before.the.game.began.so.they.did.have.the.option.to.refer.to.previous.rounds.in.

order.to.identify.the.changes..Therefore.the.subjects.should.have.noticed.that.the.costs. did.change.between.rounds.even.though.this.was.not.stated.explicitly... The.choices.of.the.Principals.are.more.important.than.those.of.the.Agents.for.the. analysis.of.the.intrinsic.value.of.the.decision.right.since.it.is.the.Principal.who.makes. the.delegation.decision..The.Principal.initially.holds.the.decision.right.and.can.choose. the.minimum.number.of.hours.that.the.Agent.must.choose.to.work.in.order.for.the. Principal.to.be.willing.to.delegate..The.Principal.therefore.makes.two.choices:.the. number.of.hours.that.he.or.she.would.choose.to.work.if.he.or.she.keeps.the.decision. right,.and.the.minimum.number.of.hours.that.the.Agent.must.have.chosen.in.order.for. the.principal.to.be.willing.to.delegate.the.decision.right..The.Agent.only.makes.one. choice:.the.number.of.hours.that.he.or.she.will.work.. In.part.2.of.the.experiment,.participants.were.tested.according.to.the.Burger. Cooper.(1979).Desirability.of.Control.scale.to.examine.whether.the.source.of.intrinsic. value.in.the.experiment.can.be.explained.by.a.desire.for.control..In.their.article,. Bartling,.Fehr.and.Herz.(2014).examined.a.number.of.possible.alternative.explanations. for.their.findings:.loss.aversion,.illusion.of.control,.preference.reversals,.reciprocity,. failure.to.elicit.the.principal’s.indifference.point.and.bounded.rationality..Each.of.these. possibilities.will.be.discussed.in.more.detail.in.the.Theoretical.Background.section.of. this.paper..None.of.these.alternative.explanations.fit.the.findings.of.the.experiment,.so. the.authors.have.left.further.exploration.of.the.source.of.intrinsic.value.to.future. research..I.will.test.to.see.whether.a.desire.for.control,.as.evidenced.by.a.higher.than. average.score.on.the.Burger.Cooper.(1979).Desirability.of.Control.scale,.is.correlated. with.a.higher.intrinsic.value.of.the.decision.right... Formulation(of(Hypothesis( . My.research.experiment.will.attempt.to.prove.three.hypotheses..First,.I.hope.to. reaffirm.the.finding.of.Bartling,.Fehr.and.Herz.(2014).that.there.does.exist.an.intrinsic. value.to.decision.rights..Secondly,.I.will.analyze.the.impact.of.asymmetric.effort.costs.on. the.intrinsic.value.of.decision.rights..Lastly,.I.will.look.for.positive.correlation.between. the.degree.to.which.the.subject.exhibits.intrinsic.preferences.for.decision.rights.and. their.score.on.the.Burger.Cooper.Desirability.of.Control.scale.

Hypothesis'1:.There.exists.an.intrinsic.value.component.to.the.decision.right... In.line.with.the.results.of.Bartling,.Fehr.and.Herz.(2014),.I.expect.to.find.that. subjects.will.choose.higher.than.optimal.thresholds.for.delegation,.indicating.that.they. would.prefer.to.keep.the.decision.right.even.though.it.is.profitable.to.delegate..Previous. studies.outlining.the.existing.of.a.preference.for.control.have.already.been.discussed.in. detail.in.the.Related.Literature.section.of.this.paper..I.expect.that.the.subjects.in.my. experiment.will.exhibit.a.desire.to.control.their.own.choices.in.the.same.way.as.the. subjects.in.the.experiments.conducted.by.Fehr,.Herz.and.Wilkening.(2013).and.Owens,. Grossman.and.Fackler.(2014)... If.I.am.able.to.show.that.intrinsic.value.of.decision.rights.does.exist.within.my. experimental.results,.I.will.then.look.at.the.possible.impact.of.asymmetric.effort.costs. on.the.size.of.this.intrinsic.value..As.I.will.only.be.looking.at.the.responses.from. Principals,.and.the.reductions.in.effort.costs.only.apply.to.the.Agents,.in.theory.these. changes.should.not.affect.the.Principal’s.delegation.decision.. Hypothesis'2:'Increasing.the.asymmetry.in.the.effort.costs.between.the. Principal.and.Agent.should.not.have.an.effect.on.the.Principal’s.delegation.decision..' The.payoffs.to.both.parties.and.the.costs.of.effort.for.the.Principal.will.not. change.between.rounds..The.only.change.is.the.Agent’s.cost.of.effort..Therefore.the.fully. rational.Principal’s.predicted.effort.choice.(hours.worked).and.minimum.effort. requirement.for.delegation.to.occur.should.stay.the.same..At.the.same.time,.the.Agent’s. costs.are.reduced.so.his.or.her.predicted.values.of.hours.worked.are.increasing..The. fully.rational.Agent.should.choose.increasingly.higher.effort.levels.as.his.or.her.costs. decrease... These.theoretical.predictions.are.based.on.utility.functions.that.are.derived.in. the.Theoretical.Background.section.of.this.paper..My.utility.functions.are.based.on.the. experiment.of.Bartling,.Fehr.and.Herz.(2014)..Bartling.et.al..based.their.experimental. design.and.utility.functions.on.the.work.of.Aghion.and.Tirole.(1997)... Table.1.below.summarizes.the.optimal.choices.for.each.party.in.each.round,. given.risk^neutral.and.selfish.preferences..The.values.shown.in.this.table.will.be.derived. in.the.next.section...

It.is.possible.that.the.increasing.asymmetry.of.effort.costs.may.have.an.impact. on.the.delegation.decision.and.the.resulting.intrinsic.value.of.the.decision.right.. However,.because.there.is.only.very.limited.research.on.the.correlation.between.effort. costs.and.intrinsic.value.of.decision.rights,.it.is.impossible.to.predict.the.size.or. direction.of.any.potential.relationship.between.these.two.values... . My.third.hypothesis.focuses.on.a.possible.tool.for.analyzing.an.individual’s. preference.for.control,.namely.the.Burger.Cooper.Desirability.of.Control.Scale.. Hypothesis'3:'The.degree.to.which.a.person.intrinsically.values.decision.rights. is.positively.correlated.with.his.or.her.score.on.the.Burger.Cooper.Desirability.of. Control.Scale... In.the.experiment.by.Owens,.Grossman.and.Fackler.(2014),.subjects.with.high. Burger.Cooper.scores.exhibited.an.increased.willingness.to.pay.for.control..If.this.effect. is.also.observed.within.my.experiment,.it.will.lend.further.support.for.the.overall. finding.of.Bartling,.Fehr.and.Herz.(2014)..Burger.and.Cooper.(1979).argue.that.this. score.is.an.accurate.representation.of.a.stable.personality.trait..If.this.score.is.linked.to. intrinsic.value,.it.will.show.that.the.intrinsic.value.of.the.decision.right.does.indeed. stem.from.an.innate.desire.for.control.rather.than.another.possible.explanation.such.as. inequity.aversion,.loss.aversion.or.reciprocity... Theoretical(Background( In.order.to.accurately.measure.the.size.of.the.intrinsic.value.of.the.decision.right,. it.is.necessary.to.first.calculate.the.instrumental.value.of.the.decision.right.for.a.selfish,. rational.and.risk^neutral.Principal..The.optimal.behavior.of.such.a.Principal.can.be. determined.under.the.assumption.that.the.decision.rights.have.zero.intrinsic.value..To. do.this,.all.that.is.necessary.is.to.solve.a.simple.maximization.problem.for.the.number.of.

hours.that.the.Principal.will.commit.to.work,.and.then.find.the.equivalent.payoff.given. the.number.of.hours.that.the.Agent.must.commit.to.work.in.order.for.the.Principal.to.be. willing.to.delegate..The.expected.payoff.for.the.Principal.does.not.change.between. rounds..Therefore.a.fully.rational.Principal.should.not.change.his.or.her.answers. between.rounds,.since.the.expected.payoffs.do.not.change...The.payoffs.for.each.party. and.round.are.shown.more.formally.in.Table.2.below... To.summarize.Table.2,.the.party.with.the.decision.right.earns.a.payout.in.each. round.of.250.minus.their.effort.costs.if.the.project.is.successful..The.effort.costs. increase.with.the.probability.of.success,.so.the.higher.the.chosen.probabilities.of. success.is,.the.higher.the.effort.costs.will.be..If.the.project.is.successful,.the.party. without.the.decision.rights.received.200..If.the.project.is.not.successful,.both.parties. receive.100.each... To.determine.the.condition.under.which.the.principal.will.delegate.the.decision. right,.I.first.have.to.determine.the.optimal.number.of.hours.chosen.by.the.Principal.if.he. chooses.to.keep.control..Let.!_!(represent.the.number.of.hours.that.the.Principal. chooses.to.work..Then.with.probability.!_!.the.project.is.a.success.and.the.Principal’s. preferred.project.is.implemented..Let.!_!.represent.the.payoff.to.the.Principal.of.the. Principal’s.preferred.project..With.probability.(100 − !_!).the.project.is.unsuccessful. and.the.outside.option.is.implemented..Let.!!.represent.the.payoff.to.the.Principal.of. outside.option..Exerting.effort.is.costly,.the.effort.costs.are.represented.by.!(!_!).. Hence,.the.Principal.chooses.!_!.as.to.maximize:. !_! !_! + 100 − !_! !_!− !(!_!). Table.3.below.shows.the.calculated.values.of.hours.worked.(!_!).using.the. function.above.and.given.the.parameters.specified.in.the.experiment..Note.that.because.

the.payoffs.and.the.Principal’s.effort.costs.do.not.change.between.rounds,.the. Principal’s.optimal.choice.for.hours.worked.similarly.does.not.change.between.rounds.. The.Principal.should.optimally.choose.to.work.75.hours.in.each.round..The.actual. payoff.amounts.and.costs.of.effort.used.in.these.calculations.can.be.found.in.Appendix. 3..Further,.the.exact.calculations.were.made.in.Excel,.because.the.effort.function.is. discrete... . Next.I.will.determine.the.Principal’s.payoff.if.he.decides.to.delegate.the.decision. right.to.the.Agent..Now.it.is.the.Agent’s.effort.choice.that.determines.the.probability.of. success..Let.!_!.represent.the.number.of.hours.that.the.Agent.chooses.to.work..Now. with.probability.!_!.the.project.will.be.successful.and.the.Agent’s.preferred.project.will. be.implemented..Let.!_!.represent.the.payoff.to.the.Principal.of.the.Agent’s.preferred. project..With.probability.(100 − !_!).the.project.will.be.unsuccessful.and.the.outside. option.will.be.implemented.yielding.!_!to.the.Principal..Hence,.the.Principal’s.payoff.if. the.decision.is.delegated.equals. !_! !_! + 100 − !_! !_!. Therefore.the.Principal.chooses.to.delegate.to.the.Agent.if. !! !! + 100 − !! !!! > ! !!∗ !! + 100 − !!∗ !!− !(!!∗).. where.!_!∗_{.represents.the.effort.chosen.by.the.Principal.if.he.or.she.decides.to.keep.} control..As.follows.from.Table.3,.!_!∗_.=.75... Rewriting.above.equation.gives.the.minimum.required.effort.level.for. delegation..The.Principal.should.only.delegate.when.the.benefit.of.delegation.is.greater. than.the.benefit.of.keeping.control..This.minimum.value.is.represented.by.!..That.is,. only.delegate.when:. !_!! ≥ ! = !!!∗ !!!!! !!(!!∗) !!!!!! ..

Table.4.below.shows.the.minimum.number.of.hours.that.the.Agent.should.have. chosen.in.order.for.the.Principal.to.be.willing.to.delegate,.denoted.above.as.!..The. selfish,.rational.Principal.is.indifferent.between.delegating.and.keeping.the.decision. right.when.the.Agent.chooses.to.work.57.hours..Note.that.because.the.payoffs.and.the. Principal’s.effort.costs.do.not.change.between.rounds,.the.Principal’s.optimal.minimum. hours.requirement.for.delegation.similarly.does.not.change.between.rounds..These. figures.are.calculated.using.the.functions.above.and.the.values.in.Appendix.3.. . The.outcome.of.the.maximization.problem.for.the.Agent.is.slightly.different. because.the.Agent’s.costs.of.effort.change.between.rounds..Similarly.to.that.of.the. Principal,.the.Agent’s.maximization.function.can.be.written.as!!_! !_! + 100 −

!_! !_!− !(!_!).where.!_!!represents.hours.worked.chosen.by.the.agent,.!_!.represents.

the.payoff.to.the.Agent.of.the.Agent’s.preferred.project,.!_!.represents.the.payoff.of.the. outside.option,.and.!(!_!)!represents.the.total.cost.to.the.Agent.of.the.hours.worked.. Using.the.parameters.from.the.experiment,.Table.5.below.shows.the.predicted.choices. for.the.perfectly.rational,.selfish,.risk^neutral.agent..The.actual.payoff.amounts.and. costs.of.effort.used.in.these.calculations.can.be.found.in.the.Experimental.Instructions. in.Appendix.3.. . Once.the.instrumental.value.is.calculated.for.a.perfectly.rational,.selfish.and.risk^ neutral.Principal.and.Agent,.it.is.simple.to.determine.the.intrinsic.value..The.intrinsic. value.in.this.experiment.is.simply.the.difference.between.the.actual.choices.made.and. the.instrumental.value..More.formally,.intrinsic.value.inherent.in.the.subject’s.choice.of.

minimum.hours.to.work.can.be.shown.as.! − !.where.!!represents.the.number.of. hours.that.would.optimize.the.payoff.for.the.risk.neutral,.selfish.subject.and.!. represents.the.minimum.number.of.hours.for.delegation.that.was.actually.chosen... ! = !"#$%&!!"#$%!!ℎ!"#$!!"!!"#$%&'. ! =!!∗ !!− !! − !(!!∗) !_! −!!_! . . !"#$%&!!"#$%!!ℎ!"#$!!"!!"#$%&' −!!∗ !!!!! !! !!∗ !!!!!! = !!"#$%"&%'!!"#$%!!"!!ℎ!!!"#$%$&'!!"!ℎ!.. . . ! − ! = !"#$%"&%'!!"#$%!!"#ℎ!!!"#$%$&'!!"#ℎ!. . If.the.result.of.! − !!is.positive.then.it.will.indicate.that.there.is.a.positive. intrinsic.value.to.the.decision.right..It.indicates.that.the.Principal.requires.higher.than. optimal.effort.levels.from.the.Agent.before.delegating.the.decision.right... This.method.for.measuring.intrinsic.value.is.far.simpler.than.the.method.used.by. Bartling,.Fehr.and.Herz.(2014).and.as.a.result.it.is.also.less.precise..Their.experimental. design.included.both.a.control.lottery.and.a.delegation.lottery..Bartling,.Fehr.and.Herz. (2014).use.this.setup.to.determine.the.subject's.certain.equivalent.for.different. lotteries..I.chose.not.to.include.this.test.in.my.experiment.due.to.time.constraints.and. complexity...Instead,.I.have.chosen.only.to.include.the.first.game..According.to.Bartling,. Fehr.and.Herz,.“The.elicitation.of.the.certainty.equivalents.in.Part.2.is.time.consuming. and.researchers.interested.in.measuring.the.intrinsic.value.of.a.decision.right.may,. therefore,.want.to.rely.on.a.simpler.proxy.measure.in.some.environments..The.expected. values.of.the.delegation.and.control.lotteries.generated.in.Part.1.may.provide.the.basis. for.such.a.proxy.measure”.(Bartling,.Fehr,.Herz.(2014,.p..2025)..They.show.that.the. Principal's.expected.payoff.is.highly.and.significantly.correlated.with.the.elicited.certain. equivalent..Therefore.I.decide.to.focus.on.the.analysis.based.on.the.expected.payoffs.as. discussed.above..

As.my.design.had.to.be.simplified.to.make.implementation.in.the.classroom. possible,.I.am.less.able.to.rule.out.other.potential.explanations.for.my.findings.. However,.Bartling.et.al..(2014).were.able.to.test.for.and.rule.out.a.number.of. alternative.explanations..Their.design.controlled.for.risk.and.social.preferences.as.well. as.ambiguity.aversion..Further,.they.were.able.to.test.for.a.number.of.potential. complicating.factors... Bartling.et.al..(2014).show.that.loss.aversion.may.partly.explain.some.of.the. intrinsic.value.observed.in.their.experiment..They.elicited.the.subjects’.degree.of.loss. aversion.using.lottery.tasks..However,.loss.aversion.cannot.explain.fully.the.existence.of. intrinsic.value..Loss.aversion.requires.a.loss.of.a.value..Bartling.et.al..(2014).ran.the. experiment.using.certainty.equivalents.in.which.subjects.also.indicated.a.preference.for. decision.rights.even.though.they.had.lost.nothing..Therefore.loss.aversion.may.impact. the.size.of.the.intrinsic.value.of.decision.rights.but.it.cannot.entirely.explain.the. existence.of.the.intrinsic.value.component.in.Bartling,.Fehr.and.Herz’s.(2014).results.. Bartling,.Fehr.and.Herz.(2014).tested.for.illusion.of.control.using.a.modified. version.of.the.incentive.compatible.elicitation.method.from.Charness.and.Gneezy. (2010)..Subjects.were.paid.based.on.the.outcome.of.the.role.of.a.dice..Subjects.were. offered.the.option.to.pay.to.roll.the.dice.themselves.or.have.the.experimenter.do.it.for. them..The.results.show.that.91%.of.subjects.in.the.Bartling,.Fehr.and.Herz.(2014). experiment.are.unwilling.to.pay.to.roll.the.dice..Therefore.it.is.unlikely.that.an.illusion. of.control.is.impacting.the.overall.results.of.their.experiment... Bartling.et.al..(2014).also.tested.for.preference.reversals.by.examining.the. variations.in.responses.between.their.certainty.and.delegation.lotteries..Preference. reversals.usually.stem.from.the.tendency.of.subjects.to.overweight.high.value.payoffs. with.small.probabilities,.as.demonstrated.by.Kahneman.and.Tversky.(1979)..Bartling.et. al..find.that.overpricing.of.high^amount.lotteries.does.not.explain.the.difference. between.the.outcomes.of.the.two.delegation.and.control.lotteries..Therefore.preference. reversals.do.not.appear.to.be.affecting.the.results.. Reciprocity.was.also.considered.and.then.rejected.as.a.possible.explanation.for. the.results.in.Bartling.et.al..(2014)..For.the.reciprocity.argument.to.hold,.the.differences. in.certainty.equivalents.between.control.lotteries.would.have.to.be.negatively.

correlated.with.the.minimum.effort.requirement..This.is.because.when.the.Principal. holds.the.decision.right,.he.or.she.should.set.the.minimum.effort.requirement.lower.in. response.to.a.higher.perception.of.unfriendliness.of.the.Agent..The.opposite.is.true.in. the.results.so.reciprocity.cannot.explain.them.. Finally,.Bartling,.Fehr.and.Herz.(2014).tested.to.see.that.subjects.fully. understood.the.decisions.that.they.made.in.the.delegation.game..They.ran.a.second. experiment.to.eliminate.the.possibility.that.some.Principals.might.be.willing.to.pay.for. delegation.and.found.that.this.is.not.the.case..Their.design.ensured.that.the.instructions. were.presented.clearly.and.that.the.subjects.had.the.opportunity.to.revise.their. responses.as.needed..The.Principals.also.react.largely.according.to.the.theoretical. predictions...Therefore.Bartling,.Fehr.and.Herz.(2014).conclude.that.the.subjects. understood.their.experiment.and.reacted.according.to.their.own.preferences.. Based.on.the.findings.of.Bartling,.Fehr.and.Herz.(2014).I.should.be.able.to. measure.the.intrinsic.value.of.the.decision.rights.by.looking.at.the.difference.! − !.. Unfortunately,.I.will.be.unable.to.check.whether.in.my.adjusted.design.there.are.no. other.factors.that.could.explain.my.findings..Therefore.my.results.should.be.interpreted. with.caution..In.the.discussion.I.will.pay.attention.to.potential.alternative.explanations.. If.this.value.(! − !)!is.positive.then.it.is.an.indication.that.subjects.prefer.to.hold.onto. decision.rights.even.when.delegating.maximizes.their.payoffs.. To.further.simplify.the.experiment,.I.reduced.the.number.of.rounds.from.ten.to. five..In.the.original.experiment,.Bartling.Fehr.and.Herz.(2014).varied.the.stake.size. between.each.round..Therefore.they.needed.the.full.ten.rounds.in.order.to.analyze.both. the.effect.of.stake.size.and.the.effect.of.conflict.of.interest..Since.my.experiment.will. exclude.the.effects.of.stake.size.I.will.only.consider.five.rounds.. For.the.sake.of.simplicity,.my.experiment.is.designed.so.that.the.project.payoffs. will.remain.the.same.in.each.round..I.believe.that.this.modification.will.make.it.easier. for.subjects.to.identify.the.key.variable.that.has.changed,.namely.the.cost.of.effort.for. the.Agent..Because.of.this.simplification,.I.am.able.to.present.the.subjects.with.the. following.chart.that.will.remain.constant.throughout.the.experiment:

TABLE.6:.Extracted(from(the(instructions(to(Participant(A((see(Appendix(1).(The(table(for(Participant(B(was( identical(except(that(it(referred(to(Participant(B(as(“you”((see(Appendix(2). The.payoffs.in.Table.6.above.are.approximately.the.average.of.the.payoffs.given. by.Bartling,.Fehr.and.Herz.(2014).in.the.first.five.rounds.of.their.experiment.in.which. the.payment.for.an.unsuccessful.project.is.fixed.at.100.(Bartling,.Fehr,.Herz.(2014,.p.. 2014))..It.is.important.that.the.payoffs.are.slightly.higher.for.the.party.with.the.decision. right;.otherwise.it.is.always.strictly.better.to.delegate.in.order.to.achieve.the.full.payoff. without.incurring.any.costs... In.an.additional.attempt.at.simplification,.my.version.of.the.experiment.will.not. require.the.subject.to.choose.which.project.he.or.she.would.prefer,.Rather,.I.will.make. the.assumption.on.the.behalf.of.the.subject.that.he.or.she.prefers.the.project.alternative. that.provides.them.with.the.highest.potential.payoff..That.is,.I.will.assume.that.subjects. are.generally.self^interested..In.the.Bartling.et.al..(2014).experiment,.this.assumption. was.true.97%.of.the.time..I.have.no.reason.to.believe.that.this.should.change.in.this. revised.version.of.the.experiment,.so.it.should.be.safe.to.eliminate.this.choice.from.the. experimental.design. In.contrast.to.the.subjects.in.the.Bartling,.Fehr.and.Herz.(2014).experimental. sessions,.the.subjects.in.my.experiment.are.for.more.likely.to.be.unfamiliar.with.basic. economic.terms..Therefore.I.will.refer.to.both.effort.level.and.probability.of.success.as. hours(worked..In.my.experiment,.each.participant.will.choose.a.number.of.hours.that. they.will.commit.to.work..Just.as.with.the.effort.level.terminology.used.by.Bartling.et.al.. (2014),.1.hour.=.1%.chance.of.success,.50.hours.=.50%.chance,.and.so.on..I.don’t. believe.that.this.change.should.affect.the.integrity.of.the.experiment..Rather,.it.simply. removes.the.need.to.explain.new.terminology.to.the.subjects. . These.aforementioned.simplifications.and.modifications.should.not.significantly. affect.the.measuring.of.the.intrinsic.value.of.the.decision.right..Rather,.with.these. modifications,.younger.subjects.are.able.to.participate.in.the.experiment.within.the.

time.available.in.a.short.study.period..These.younger.subjects.may.actually.prove.to.be. a.better.test.group.for.studying.the.intrinsic.value.of.the.decision.right,.since.their. opinions.are.not.affected.by.advanced.statistical.training.or.previous.knowledge.of. economic.experiments.(Cooper.et.al..(1999)).. Experimental(Procedures Subjects.in.this.experiment.were.high.school.students.between.the.ages.of.14. and.17..In.this.group.of.42.students,.24.were.Male.and.18.were.female..The.average.age. was.15.38... The.experiment.was.conducted.during.the.students’.study.hour.in.a.classroom. setting..Precautions.were.taken.to.avoid.the.sharing.of.information..Students.were. instructed.to.raise.their.hand.to.ask.a.question..As.the.experimenter,.I.answered.all. questions.individually.at.the.student’s.desk...However,.because.of.the.open.classroom. setting,.it.is.difficult.to.ensure.that.no.information.passed.between.subjects.. Because.the.analysis.is.based.entirely.on.the.actions.of.the.Principal,.the.number. of.observations.is.maximized.by.only.choosing.five.subjects.to.act.as.Agents,.and.all.the. rest.are.Principals..There.were.a.total.of.42.participants,.so.37.of.the.participants.were. given.instructions.as.Principals.(Participant.A.in.experimental.terms),.and.the.other.5. were.given.instructions.as.Agents.(Participant.B)..In.this.way,.the.Principals.can.know. that.they.will.be.matched.with.a.different.Agent.in.each.round.since.there.are.only.five. rounds..It.is.made.clear.to.participants.that.they.will.be.matched.with.a.different.Agent. each.time,.but.that.more.than.one.Principal.could.be.matched.to.the.same.Agent..The. Principals.and.Agents.never.learn.with.whom.they.were.matched,.so.matching.multiple. Principals.to.a.single.Agent.should.not.affect.the.results.of.the.experiment.. At.the.end.of.the.experiment,.the.roll.of.two.dice.determined.the.success.or. failure.of.the.projects..During.the.experimental.session,.one.student.volunteer.was. selected.to.roll.the.dice..The.number.displayed.on.the.first.dice.was.an.eight,.and.the. number.on.the.second.dice.was.a.two,.so.all.projects.with.a.probability.of.success.of.82. or.more.turned.out.to.be.successful,.and.all.projects.with.a.probability.of.success.of.81. or.less.turned.out.to.be.unsuccessful...

Rather.than.individual.payouts,.the.students.elected.for.their.payments.to.be. donated.to.their.spring.class.trip..A.total.of.$100.was.donated,.exceeding.the.amount. actually.earned.by.the.students.during.the.experiment. 3.'Results' ' The.results.of.Part.1.of.the.experiment.illustrate.two.key.findings:.a).Subjects.do. appear.to.value.decision.rights.intrinsically,.and.b).the.degree.of.the.intrinsic.value. inherent.in.the.decision.right.is.positively.correlated.with.the.asymmetry.of.effort.costs.. Unfortunately.the.results.of.Part.2.are.less.conclusive..It.seems.that.no.direct. correlation.is.observed.between.the.subject’s.Burger.Cooper.score.and.the.degree.to. which.he.or.she.intrinsically.values.decision.rights..Both.of.these.results.will.be. discussed.in.more.detail.in.the.following.sections.. Results:(Part(1( The.results.of.the.Principal^Agent.game.conducted.in.Part.1.support.the.main. finding.of.Bartling,.Fehr.and.Herz.(2014),.the.existence.of.an.intrinsic.value.component. to.the.decision.right..Subjects.choose.higher.than.optimal.minimum.thresholds.for. delegation..This.behavior.seems.to.be.an.indication.that.they.would.generally.prefer.to. keep.the.decision.right.even.when.it.is.in.their.best.interest.to.delegate.to.achieve.the. highest.expected.payout... In.order.to.determine.the.statistical.significance.of.the.results,.the.minimum. number.of.hours.for.delegation.chosen.by.the.Principals.in.each.round.is.compared. with.the.theoretically.predicted.outcome.for.rational,.selfish.and.risk^neutral.subjects..If. there.were.no.intrinsic.value.component.to.the.decision.right,.we.would.expect.all. Principals.to.choose.a.minimum.number.of.hours.for.delegation.of.57.in.all.rounds..(See. Theoretical.Background.section.for.full.explanation.of.this.predicted.value)..Instead,.the. Principals.tend.to.choose.much.higher.minimum.hour.requirements.for.delegation.in.all. except.for.the.first.round..Table.7.below.summarizes.the.average.minimum.number.of. hours.that.the.Principals.required.for.delegation.compared.with.the.theoretical. prediction..Note.that.the.results.in.rounds.2^5.are.each.significantly.different.from.the. theoretical.predication.(p.<.0.001,.Wilcoxon.signed^rank.test)...

. To.further.examine.the.experimental.results.in.Table.7.above,.the.choices.made. by.each.subject.were.compared.between.rounds..The.results.of.each.round.were. compared.to.the.results.of.the.round.prior.in.order.to.determine.whether.or.not. subjects.changed.their.responses.between.rounds..The.results.indicate.that.Principals. do.indeed.change.their.responses.from.one.round.to.the.next.in.response.to.the.change. in.the.effort.costs.of.the.Agent..Round.2.was.tested.against.Round.1,.Round.3.against. Round.2,.and.so.on..The.results.of.the.changes.between.rounds.(1^2).and.(2^3).are. significant.at.the.1%.level,.round.(3^4).is.significant.at.the.10%.level.and.round.(4^5).is. significant.at.the.5%.level.using.the.Wilcoxon.signed^rank.test... Contrary.to.the.minimum.hours.requirement,.the.number.of.hours.that. Principals.themselves.choose.to.work.is.significantly.less.than.the.predicted.value.in.all. rounds..Recall.that.if.there.were.no.intrinsic.value.component.to.the.decision.right,.all. Principals.would.be.expected.to.work.75.hours.in.each.round.in.order.to.maximize.their. payoffs..Instead,.the.Principals.choose.much.lower.values.in.all.rounds..The.chart.below. summarizes.the.average.hours.that.the.principals.chose.to.work.compared.with.the. theoretical.prediction..As.with.the.previous.result,.note.that.rounds.2^5.are.all. significantly.different.from.the.theoretical.prediction.(p.<.0.001,.Wilcoxon.signed^rank. test).. .

A.further.examination.of.the.results.shown.in.Table.8.was.conducted.in.order.to. see.if.the.responses.changed.between.rounds..The.number.of.hours.chosen.in.each. round.was.compared.to.the.result.of.the.round.prior.in.order.to.determine.whether.or. not.subjects.changed.their.responses.between.rounds..In.this.case,.only.round.2.is. statistically.different.from.the.round.before.(p.<.0.001,.Wilcoxon.signed^rank.test)... The.results.presented.in.Tables.7.and.8.show.that.the.Principals.choose.higher. than.optimal.values.for.delegation.and.lower.than.optimal.values.for.hours.worked..In. order.to.further.examine.these.findings,.I.calculated.the.values.for.delegation.that. would.offer.an.equivalent.expected.payoff.to.the.amount.of.hours.worked.that.the. Principal.actually.chose..These.values.are.summarized.in.Table.9.below..In.order.to.find. the.predicted.minimum.value.for.delegation.given.the.hours.worked,.I.first.calculated. the.expected.probability^weighted.payoff.given.the.value.for.hours.worked.that.was. chosen.by.the.subject..I.then.found.the.equivalent.probability^weighted.payoff.for.the. minimum.delegation.requirement..These.expected.payoffs.for.all.options.(1^100.hours). and.all.five.rounds.are.given.in.Appendix.6..The.data.shows.that.a.perfectly.rational,. selfish.Principal.would.choose.a.lower.than.optimal.minimum.for.delegation.to.match. the.lower.than.optimal.expected.payoff.of.the.value.chosen.for.hours.worked..This. difference.is.significant.at.the.1%.level.for.rounds.2^5.(p.<.0.001,.Wilcoxon.signed^rank. test).. . Now.that.the.choices.of.the.subjects.chosen.to.act.as.Principals.have.been. presented,.I.will.briefly.discuss.the.limited.findings.from.the.Agents..As.discussed.in.the. Experimental.Procedures.section.of.this.paper,.only.5.of.the.42.subjects.were.assigned. to.be.Agents..Even.though.it.is.impossible.to.draw.any.conclusions.from.such.a.limited. data.set,.it.would.appear.that.the.agents.do.tend.to.increase.the.number.of.hours.that.

they.are.willing.to.work.when.their.effort.costs.decline..Table.10.(below).shows.the. number.of.hours.that.the.agents.actually.chose.to.work,.compared.with.the.predicted. values.for.those.with.perfectly.rational,.selfish.and.risk.neutral.preferences.as. calculated.in.the.Theoretical.Background.section.of.this.paper.. . Given.the.actual.choices.made.by.both.Principals.and.Agents.(shown.in.Tables.7^ 10),.it.is.possible.to.calculate.the.expected.payoff.given.the.choices.actually.made.in.the. experiment..This.is.shown.in.Table.11.below..The.Predicted.Payoff.column.shows.the. payoff.that.would.have.been.achieved.if.the.Principal.had.chosen.the.theoretically. predicted.optimal.values.of.75.hours.worked.and.57.hours.required.of.the.Agent.for. delegation..The.minimum.and.maximum.amounts.are.the.same.across.all.rounds..The. minimum.earned.was.100,.equal.to.the.payment.for.an.unsuccessful.project..The. maximum.amount.earned.was.200,.which.was.equal.to.the.payoff.of.a.successful.project. delegated.to.the.Agent..In.this.experiment,.delegation.resulted.in.the.highest.possible. payoffs..The.difference.between.the.predicted.payoff.amount.and.the.actual.payoff. amount.was.significant.at.the.5%.level.for.rounds.1,.2.and.5.and.significant.at.the.1%. level.for.rounds.3.and.4.(Wilcoxon.signed^rank.test).. . These.choices.made.by.the.Principals.in.Part.1.were.tested.for.internal. consistency.using.Cronbach’s.Alpha..The.choices.made.by.the.Principals.regarding.the. minimum.hours.for.delegation.were.internally.consistent.between.rounds.with.a. reliability.coefficient.of.0.8437..The.number.of.hours.chosen.by.the.Principals.to.work. was.internally.consistent.between.rounds.with.a.reliability.coefficient.of.0.9496..

Possible.values.of.Cronbach’s.alpha.range.from.zero.to.one.and.generally.any.reliability. coefficient.above.0.7.is.considered.acceptable..Therefore.this.result.demonstrates.a.high. degree.of.internal.reliability..Further.details.on.this.analysis.can.be.found.in.Appendix. 5.. The.results.presented.in.this.section.serve.to.confirm.Hypotheses.1.and.2..There. does.exist.a.positive.intrinsic.value.of.the.decision.right.and.it.is.positively.correlated. with.the.degree.of.asymmetry.of.effort.costs..The.overall.finding.of.Bartling,.Fehr.and. Herz.(2014).that.decision.rights.do.exists.is.supported.by.the.results.of.this.revised. experiment... Result(1:(The(large(majority(of(subjects(value(decision(rights(intrinsically,(and(the(degree( of(intrinsic(value(is(positively(correlated(with(the(asymmetry(of(effort(costs.( The.following.section.of.this.paper.will.examine.the.results.of.the.Burger.Cooper. Desirability.of.Control.scale.and.it’s.implications.on.the.results.of.Part.1..As.described.in. the.literature.review,.the.Burger.Cooper.Desirability.of.Control.scale.is.designed.to.elicit. the.individual’s.preference.for.control,.which.Burger.and.Cooper.(1979).describe.as.a. stable.personality.trait..The.scale.consists.of.twenty.self^descriptive.statements.to. which.the.subjects.rate.the.degree.to.which.they.feel.the.statement.applies.to.them.on.a. scale.of.1^7..Some.questions.are.framed.negatively.and.others.positively..The.scores.of. all.20.statements.are.added.together.(taking.the.inverse.of.the.negatively.worded. questions).in.order.to.calculate.the.Burger.Cooper.score..The.average.score.for.all. subjects.in.Burger.and.Cooper’s.(1979).experiment.was.102.7.. Results:(Part(2( Shown.in.Table.11.below,.the.mean.Burger.Cooper.score.was.124.00.with.a. standard.deviation.of.5.40..The.minimum.and.maximum.values.are.also.listed,.along. with.summary.statistics.by.age.and.gender...

. The.Burger.Cooper.scores.given.in.Table.11.were.tested.against.the.average. value.found.by.Burger.Cooper.(1979).of.102.7..The.results.shown.here.are.all. significantly.higher.than.this.predicted.value.across.all.groups.(age.and.gender).at.the. 1%.level.(Wilcoxon.signed^rank.test).. Within.these.results,.I.tested.for.relationships.between.the.various.age.groups. and.genders.using.Wilcoxon.sign^rank.tests..Each.group.(14,.15,.16.and.17.year.olds). was.compared.to.the.overall.average.score.and.to.each.of.the.other.groups..The.results. show.that.the.age.groups.are.not.significantly.different.from.each.other..The.Burger. Cooper.scores.of.Male.and.Female.subjects.are.also.not.significantly.different.from.each. other.(Wilcoxon.signed^rank.test).. The.items.of.the.Burger.Cooper.scale.were.tested.for.internal.consistency.using. Cronbach.alpha.factor.analysis..The.Cronbach’s.alpha.is.0.7213..Generally.any.reliability. coefficient.above.0.7.is.considered.acceptable.so.this.result.suggests.a.strong.positive. correlation.between.questions..Therefore,.this.result.shows.that.the.Burger.Cooper.test. is.internally.consistent..More.detailed.results.of.this.test.for.each.question.of.the.Burger. Cooper.score.can.be.found.in.Appendix.5... The.Burger.Cooper.scores.were.then.compared.to.the.results.of.Part.1..No. significant.correlations.were.found..Table.12.(below).shows.the.correlation.coefficients. between.each.round.of.Part.1.and.the.Burger.Cooper.score..The.correlation.between.the. minimum.hours.chosen.for.delegation.to.occur.and.the.subject’s.Burger.Cooper.score. never.exceeds.0.2059..This.result.indicates.that.the.correlation.is.very.small.at.best..It.is. interesting.to.note.that.although.the.correlations.are.very.small,.they.are.all.positive..

. As.shown.in.Figure.3.(below),.the.minimum.number.of.hours.the.Principal. required.for.delegation.in.the.first.round.of.Part.1.is.not.significantly.related.to.that. individual’s.score.on.the.Burger.Cooper.Desirability.of.Control.scale..The.first.round. was.used.for.this.comparison.because.this.round.was.not.affected.by.changes.in.the. asymmetry.in.costs..The.same.test.for.correlation.between.the.Burger.Cooper.score.and. all.four.other.rounds.of.the.experiment.was.also.completed..The.output.of.these.tests. can.be.found.in.Appendix.5..No.significant.relationship.was.identified.between.the. Burger.Cooper.score.and.any.of.the.five.rounds.. . FIGURE.3:(Scatterplot(showing(the(Principal’s(Burger(Cooper(Score(in(relation(to(the(Principal’s(actual( minimum(hours(required(for(delegation(in(round(1. Given.the.lack.of.significant.correlation.between.the.Burger.Cooper.score.and. the.results.of.Part.1,.Hypothesis.3.cannot.be.accepted...