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Do people buy the right amount of information? In a novel field experiment, businesspeople experts provided guesses about the price and quality of actual websites. Compensation was provided for correct results (high or low). Before answers were revealed, subjects could pay to get a noisy signal. I find that the relationship between subjects' accuracy and their demand for information is much flatter than would be optimal. Subjects underpay for information when signals are valuable and overpay when signals are less valuable. I also find that subjects exhibit significant overconfidence. However, even when the value of information is adjusted to account for subjects' overconfidence or subjects' tendency to sometimes misuse information, subjects underpay when signals are valuable and overpay when signals are less valuable. [ABSTRACT FROM AUTHOR]
