Misperceiving the value of information in predicting the performance of others

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. DOI: https://doi.org/10.1007/s10683-006-9128-y Posted at the Zurich Open Repository and Archive, University of Zurich ZORA URL: https://doi.org/10.5167/uzh-55827 Submitted Version Originally published at: Loewenstein, George; Moore, Don A; Weber, Roberto A (2009). Misperceiving the value of information in predicting the performance of others. Experimental Economics, 9(3):281-295. DOI: https://doi.org/10.1007/s10683-006-9128-y Misperceiving the value of information in predicting the performance of others George Loewenstein, Department of Social and Decision Sciences, Carnegie Mellon University Don Moore, Graduate School of Industrial Administration, Carnegie Mellon University Roberto A. Weber, Department of Social and Decision Sciences, Carnegie Mellon University February 1, 2005 *