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The Curse of Knowledge in Economic Settings: An Experimental Analysis

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  • Camerer, Colin
  • Loewenstein, George
  • Weber, Martin

Abstract

In economic analyses of asymmetric information, better-informed agents are assumed capable of reproducing the judgments of less-informed agents. The authors discuss a systematic violation of this assumption that they 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, they 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 uncertainty are discussed. Copyright 1989 by University of Chicago Press.

Suggested Citation

  • Camerer, Colin & Loewenstein, George & Weber, Martin, 1989. "The Curse of Knowledge in Economic Settings: An Experimental Analysis," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1232-1254, October.
    • Handle: RePEc:ucp:jpolec:v:97:y:1989:i:5:p:1232-54
    DOI: 10.1086/261651
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