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Experimental Economics

, Volume 9, Issue 3, pp 281–295 | Cite as

Misperceiving the value of information in predicting the performance of others

  • George LoewensteinEmail author
  • Don A. Moore
  • Roberto A. Weber
Article

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

Experiments Information Bias 

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Copyright information

© Economic Science Association 2006

Authors and Affiliations

  • George Loewenstein
    • 1
    Email author
  • Don A. Moore
    • 2
  • Roberto A. Weber
    • 1
  1. 1.Department of Social and Decision SciencesCarnegie Mellon UniversityPittsburgh
  2. 2.Tepper School of BusinessCarnegie Mellon UniversityPittsburgh

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