Losing Face

31 Pages Posted: 16 Nov 2015

See all articles by Thomas Gall

Thomas Gall

University of Southampton - Division of Economics

David Reinstein

University of Essex

Date Written: November 15, 2015

Abstract

When Al makes an offer to Betty that Betty observes and rejects, Al may “lose face”. This loss of face (LoF) may cost Al utility, either directly or through reputation effects. This can lead to fewer offers and inefficiency in the context of bilateral matching problems, e.g., the marriage market, research partnering, and international negotiations. We offer a simple model with asymmetric information, a continuous signal of an individual’s binary type, and a linear marriage production function. We add a primitive LoF term, LoF also makes rejecting strictly preferred to being rejected, making the “high types reject” equilibrium stable. We can eliminate the effects of LoF by letting the vulnerable side move second, or setting up a “Conditionally Anonymous Environment” that only reveals when both parties say yes. We motivate our model with a variety of empirical examples, and we suggest policy and managerial implications.

Keywords: Matching, marriage markets, anonymity, reputation, adverse selection, Bayesian games, emotions

JEL Classification: D83, D03

Suggested Citation

Gall, Thomas and Reinstein, David, Losing Face (November 15, 2015). Available at SSRN: https://ssrn.com/abstract=2691050 or http://dx.doi.org/10.2139/ssrn.2691050

Thomas Gall

University of Southampton - Division of Economics ( email )

Southampton, SO17 1BJ
United Kingdom

David Reinstein (Contact Author)

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
35
Abstract Views
961
PlumX Metrics