Journal of Political Economy Vol. 97 No. 5 1989
The Curse of Knowledge in Economic Settings: An Experimental Analysis
Abstract
In economic analyses of asymmetric information, better-informed agents are assumed capable of reproducing the judgments of less-informed agents. We discuss a systematic violation of this assumption that we call the "curse of knowledge." Better-informed agents are unable to ignore private information even when it is in their interest to do so; more information is not always better. Comparing judgments made in individual-level and market experiments, we find that market forces reduce the curse by approximately 50 percent but do not eliminate it. Implications for bargaining, strategic behavior by firms, principal-agent problems, and choice under un-certainty are discussed.
- DOI
- 10.1086/261651
- Volume
- 97
- Issue
- 5
- Pages
- 1232-1254
- Language
- en
- Sources
- openalex crossref