STATES OF AFFAIRS AND STATES OF MIND - THE EFFECT OF KNOWLEDGE OF BELIEFS

Research on the ''curse of knowledge'' demonstrates a tendency to beha ve as if others have access to one's privileged information about a ce rtain state of affairs. We explore the possibility that information ab out beliefs may induce this tendency, previously attributed exclusivel y to factual knowledge. In two experiments, subjects predicted the beh avior of a buyer in a negotiation scenario, The seller's agent had a b elief about the value of the firm that was independent of its true val ue. Subjects had information about (1) the true value (i.e., factual k nowledge) and (2) the agent's belief. These two types of information w ere unknown to the buyer. Subjects' predictions of buyer behavior were affected by this privileged information about both the factual knowle dge and the agent's belief. This suggests that curse of knowledge appl ies to information not only about states of affairs but also about sta tes of mind. (C) 1995 Academic Press, Inc.