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Misperceiving the value of information in predicting the performance of others

Published online by Cambridge University Press:  14 March 2025

George Loewenstein ,
Don A. Moore  and
Roberto A. Weber
George Loewenstein*
Affiliation:
Department of Social and Decision Sciences, Carnegie Mellon University
Don A. Moore*
Affiliation:
Tepper School of Business, Carnegie Mellon University
Roberto A. Weber*
Affiliation:
Department of Social and Decision Sciences, Carnegie Mellon University
*
e-mail: GL20@andrew.cmu.edu
e-mail: rweber@andrew.cmu.edu
e-mail: dmoore@cmu.edu
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Abstract

Economic models typically allow for “free disposal” or “reversibility” of information, which implies non-negative value. Building on previous research on the “curse of knowledge” we explore situations where this might not be so. In three experiments, we document situations in which participants place positive value on information in attempting to predict the performance of uninformed others, even when acquiring that information diminishes their earnings. In the first experiment, a majority of participants choose to hire informed—rather than uninformed—agents, leading to lower earnings. In the second experiment, a significant number of participants pay for information—the solution to a puzzle—that hurts their ability to predict how many others will solve the puzzle. In the third experiment, we find that the effect is reduced with experience and feedback on the actual performance to be predicted. We discuss implications of our results for the role of information and informed decision making in economic situations.

Keywords

ExperimentsInformationBias

JEL classification

C91: Laboratory, Individual Behavior D83: Search • Learning • Information and Knowledge • Communication • Belief • Unawareness
Type
Research Article
Information
Experimental Economics , Volume 9 , Issue 3: Special Issue: Behavioral Economics , September 2006 , pp. 281 - 295
Copyright
Copyright © 2006 Economic Science Association

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Footnotes

Electronic Supplementary Material Supplementary material is available in the online version of this article at http://dx.doi.org/10.1007/s10683-006-9128-y.

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