MANUEL STAAB

Working Papers

The Benefits of Being Misinformed
with Marcus Roel
2021
revise & resubmit at the Journal of the European Economic Association

In the spirit of Blackwell (1951), we analyze how two fundamental mistakes in information processing - incorrect beliefs about the world and misperception of information - affect the expected utility ranking of information experiments. We explore their individual and combined influence on welfare and provide necessary and sufficient conditions when mistakes alter and possibly reverse the ranking of information experiments. Both mistakes by themselves reduce welfare in a model where payoff relevant actions also generate informative signals. This is true for naive decision-makers, unaware of any errors, as well as for sophisticated decision-makers, who account for the possibility of mistakes. However, mistakes can interact in non-obvious ways and an agent might be better off suffering from both, rather than just one. We provide a characterization when such positive interactions are possible. Surprisingly, this holds true only for naive decision-makers and thus naivete can be beneficial. We discuss implications for information acquisition and avoidance, welfare-improving belief manipulation, and policy interventions in general.

The Formation of Social Groups under Status Concern
2020
revise & resubmit at the Journal of Economic Theory

I study the interaction of two forces in the formation of social groups: the preference for high quality peers and the desire for status among one's peers. I present a characterization of fundamental properties of equilibrium group structures in a perfect information, simultaneous move game when group membership is priced uniformly and cannot directly depend on type. While equilibrium groups generally exhibit some form of assortative matching between individual type and peer quality, the presence of status concern reduces the potential degree of sorting and acts as a force for greater homogeneity across groups. I analyse the effect of status concern for the provision of groups under different market structures and particularly focus on the implications for segregation and social exclusion. I find that status concern reduces the potential for and benefit from segregation - both for a social planner and a monopolist - but the interaction of preference for rank and status can make the exclusion of some agents a second-best outcome.

The Evolution of Status Preferences in Anti-Coordination Games
2020

This paper analyses how risk-taking behaviour and preferences over consumption rank can emerge as an evolutionary stable equilibrium when agents face an anti-coordination task. If in an otherwise homogeneous society information about relative consumption is available, this cannot be ignored. Despite concavity in the objective function, agents are willing to accept risky gambles to differentiate themselves and thus allow for coordination. This suggests status preferences to be salient in settings where miscoordination is particularly costly.

Work in progress

Optimal sharing in social dilemmas
with Maria Kleshnina, Valentin Hübner, Christian Hilbe, and Krishnendu Chatterjee
2021

Being categorical or flexible? Decision-making rules that facilitate cooperation
with Maria Kleshnina, Kertin Grosch, and Krishnendu Chatterjee
2021

Optimal contributions in asymmetric public goods games
with Valentin Huebner, Maria Kleshnina, Christian Hilbe, and Krishnendu Chatterjee
2021

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