Hostname: page-component-5b777bbd6c-v47t2 Total loading time: 0 Render date: 2025-06-20T04:17:27.779Z Has data issue: false hasContentIssue false
  • English
  • Français

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
Get access Rights & Permissions [Opens in a new window]

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

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

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.

References

Stigler, G. (1961). The economics of information. Journal of Political Economy, 69(3), 213–225.CrossRefGoogle Scholar
Akerlof, G. A., & Kranton, R. E. (2000). Economics and identity. Quarterly Journal of Economics, 115, 713–753.CrossRefGoogle Scholar
Babcock, L., & Loewenstein, G. (1997). Explaining bargaining impasse: the role of self-serving biases. Journal of Economic Perspectives, 11, 109–126.CrossRefGoogle Scholar
Banerjee, A. V. (1992). A simple model of herd behavior. Quarterly Journal of Economics, 107, 797–817.CrossRefGoogle Scholar
Bar-Hillel, M. (1990). Back to base rates. In Hogarth, R. M. (Ed.), Insights in decision making: A tribute to Hillel J. Einhorn (pp. 200–216). Chicago, IL: The University of Chicago Press.Google Scholar
Camerer, C. F. (1992). The rationality of prices and volume in experimental markets. Organizational Behavior and Human Decision Processes, 51, 237–272.CrossRefGoogle Scholar
Camerer, C., Loewenstein, G., & Weber, M. (1989). The curse of knowledge in economic settings: an experimental analysis. The Journal of Political Economy, 97, 1232–1254.CrossRefGoogle Scholar
Caplin, A., & Leahy, J. (2001). Psychological expected utility theory and anticipatory feelings. Quarterly Journal of Economics, 116, 55–79.CrossRefGoogle Scholar
Charness, G., & Gneezy, U. (2003). Portfolio choice and risk attitudes: An experimental study. Working Paper.CrossRefGoogle Scholar
Earl, P. E. (1990). Economics and psychology: a survey. The Economic Journal, 100(402), 718755.CrossRefGoogle Scholar
Engelmann, D., & Strobel, M. (2004). The false consensus effect: Deconstruction and reconstruction of an anomaly, Working paper.CrossRefGoogle Scholar
Fischhoff, B. (1975). Hindsight = foresight: The effect of outcome knowledge on judgment under uncertainty. Journal of Experimental Psychology: Human Perception and Performance, 104, 288–299.Google Scholar
Gneezy, U., & Potters, J. (1997). An experiment on risk-taking and evaluation periods. Quarterly Journal of Economics, 112, 631–645.CrossRefGoogle Scholar
Goldstein, D. G., & Gigerenzer, G. (1999). The recognition heuristic: how ignorance makes us smart. In Gigerenzer, G., Todd, P. M., & the ABC Research Group (Eds.), Simple heuristics that make us smart (pp. 37–58). New York: Oxford University Press.Google Scholar
Goldstein, D. G., & Gigerenzer, G. (2005). The recognition heuristic and the less-is-more effect. In Plott, C. R. and Smith, V. L. (Eds.), Handbook of experimental results, Volume 1. Amsterdam: North Holland/Elsevier Press.Google Scholar
Hinds, P. J. (1999). The curse of expertise: The effects of expertise and debiasing methods on prediction of novice performance. Journal of Experimental Psychology: Applied, 5(2), 205–221.Google Scholar
Hoch, S., & Loewenstein, G. (1989). Outcome feedback: Hindsight and information. Journal of Experimental Psychology: Learning, Memory and Cognition, 15, 605–619.Google Scholar
Koszegi, B. (2001). Who has anticipatory feelings. Working Paper. University of California, Berkeley.Google Scholar
Lewis, T. R., & Sappington, D. E. M. (1997). Information management in incentive problems. The Journal of Political Economy, 105(4), 796–821.CrossRefGoogle Scholar
Loewenstein, G. (1987). Anticipation and the valuation of delayed consumption. Economic Journal, 97, 666684.CrossRefGoogle Scholar
Loewenstein, G. (1999). Because it is there: The challenge of mountaineering. .for utility theory. Kyklos, 52, 315–344.CrossRefGoogle Scholar
Lord, C., Lepper, M. R., & Ross, L. (1979). Biased assimilation and attitude polarization: The effects of prior theories on subsequently considered evidence. Journal of Personality and Social Psychology, 37, 2098–2110.CrossRefGoogle Scholar
Newton, L. (1990). Overconfidence in the communication of intent: Heard and unheard melodies. Unpublished doctoral dissertation. Stanford. CA: Stanford University.Google Scholar
Osband, K. (1989). Optimal forecasting incentives. The Journal of Political Economy, 97(5), 1091–1112CrossRefGoogle Scholar
Ouden, P. H. den (2006). Development of a design analysis model for consumer complaints: Revealing a new class of quality failures. Eindhoven, the Netherlands: Technische Universiteit Eindhoven. Unpublished doctoral dissertation.Google Scholar
Porter, R. H. (1995). The role of information in U.S. offshore oil and gas lease auctions. Econometrica, 63(1), 1–27.CrossRefGoogle Scholar
Rabin, M. (1993). Incorporating fairness into game theory and economics. American Economic Review, 83(5), 1281–1302.Google Scholar
Rabin, M., & Schrag, J. (1999). First impressions matter: a model of confirmatory bias. Quarterly Journal of Economics, 114(1), 37–82.CrossRefGoogle Scholar
Rensink, R. A., O'Regan, J. K., & Clark, J. J. (1997). To see or not to see: the need for attention to perceive changes in scenes. Psychological Science, 8, 368–373.CrossRefGoogle Scholar
Ross, L., Lepper, M.R., & Hubbard, M. (1975). Perseverance in self perception and social perception: biased attributional processes in the debriefing paradigm. Journal of Personality and Social Psychology, 32, 880–892.CrossRefGoogle ScholarPubMed
Ross, L., Greene, D., & House, P. (1977). The ‘false consensus effect’: an egocentric bias in social perception and attribution processes. Journal of Experimental Social Psychology, 13, 279–301.CrossRefGoogle Scholar
Ross, L., & Ward, A. (1996). Naive realism in everyday life: Implications for social conflict and misunderstanding. In Reed, E., Turiel, E., and Brown, T. (Eds.), Social cognition: The Ontario Symposium (pp. 305–321). Hillsdale, NJ: Erlbaum.Google Scholar
Siegel, S., & Castellan, N. J. Jr. (1988). Nonparametric statistics for the behavioral sciences. Boston, MA: McGraw-Hill.Google Scholar
Simons, D. J., & Levin, D. T. (1997). Change blindness. Trends in Cognitive Science, 1, 261–267.CrossRefGoogle ScholarPubMed
Supplementary material: File

Loewenstein et al. supplementary material

Loewenstein et al. supplementary material
Download Loewenstein et al. supplementary material(File)
File 23.7 KB