Preferences for power

Abstract

Power—the ability to determine the outcomes of others—usually comes with various benefits: higher compensation, public recognition, etc. We develop a new game, the Power Game, to demonstrate that a substantial fraction of individuals enjoy the intrinsic value of power: they accept lower payoffs in exchange for power over others, without any benefits to themselves. These preferences exist independently of other components of decision rights, cannot be explained by social preferences and are not driven by mistakes, confusion or signaling intentions. We further show that valuation of power (i) is higher when individuals directly determine outcomes of others; (ii) depends on how much discretion one has over those outcomes; and (iii) is tied to relationships between individuals. We establish that ignoring preferences for power may have large welfare implications and, consequently, should be included in the study of political systems and labor contracts.