Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/272688 
Year of Publication: 
2023
Series/Report no.: 
IZA Discussion Papers No. 16061
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We conduct a laboratory experiment to study how locus of control operates through people's preferences and beliefs to influence their decisions. Using the principal-agent setting of the delegation game, we test four key channels that conceptually link locus of control to decision- making: (i) preference for agency; (ii) optimism and (iii) confidence regarding the return to effort; and (iv) illusion of control. Knowing the return and cost of stated effort, principals either retain or delegate the right to make an investment decision that generates payoffs for themselves and their agents. Extending the game to the context in which the return to stated effort is unknown allows us to explicitly study the relationship between locus of control and beliefs about the return to effort. We find that internal locus of control is linked to the preference for agency, an effect that is driven by women. We find no evidence that locus of control influences optimism and confidence about the return to stated effort, or that it operates through an illusion of control.
Subjects: 
locus of control
preference for agency
decision-making
beliefs
optimism
confidence
illusion of control
JEL: 
D83
D87
D91
Document Type: 
Working Paper

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