Losing Face
Gall, T; Reinstein, D
Date: 15 March 2019
Journal
Oxford Economic Papers
Publisher
Oxford University Press (OUP)
Publisher DOI
Abstract
When Al makes an offer to Betty that Betty observes and rejects, Al may suffer a painful and
costly “loss of face” (LoF). LoF can be avoided by letting the vulnerable side move second, or
by setting up “Conditionally Anonymous Environments” that only reveal when both parties say
yes. This can impact bilateral matching problems, e.g., ...
When Al makes an offer to Betty that Betty observes and rejects, Al may suffer a painful and
costly “loss of face” (LoF). LoF can be avoided by letting the vulnerable side move second, or
by setting up “Conditionally Anonymous Environments” that only reveal when both parties say
yes. This can impact bilateral matching problems, e.g., marriage markets, research partnering,
and international negotiations. We model this assuming asymmetric information, continuous signals
of individuals’ binary types, linear marriage production functions, and a primitive LoF term
component to utility. LoF makes rejecting one’s match strictly preferred to being rejected, making
the “high types always reject” equilibrium stable. LoF may have non-monotonic effects on stable
interior equilibria. A small LoF makes high types more selective, making marriage less common
and more assortative. A greater LoF (for males only) makes low-type-males reverse snobs, which
makes high-females less choosy, with ambiguous effects on the marriage rate.
Economics
Faculty of Environment, Science and Economy
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