States of Affairs and States of Mind: The Effect of Knowledge of Beliefs

Abstract Research on the "curse of knowledge" demonstrates a tendency to behave as if others have access to one′s privileged information about a certain state of affairs. We explore the possibility that information about beliefs may induce this tendency, previously attributed exclusively to factual knowledge. In two experiments, subjects predicted the behavior of a buyer in a negotiation scenario. The seller′s agent had a belief about the value of the firm that was independent of its true value. Subjects had information about (1) the true value (i.e., factual knowledge) and (2) the agent′s belief. These two types of information were unknown to the buyer. Subjects′ predictions of buyer behavior were affected by this privileged information about both the factual knowledge and the agent′s belief. This suggests that curse of knowledge applies to information not only about states of affairs but also about states of mind.