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Losing Face

Author

Listed:
  • David Hugh-Jones

    () (Max Planck Institute of Economics, Jena)

  • David Reinstein

    (Department of Economics at Essex University)

Abstract

When person A makes an offer to person B and B rejects it, then A may "lose face". This loss of face is assumed to occur only if B knows for sure of A's offer. While under some circumstances loss of face can be rationalized by the consequences for future reputation, it may also enter directly into the utility function. Loss of face concerns can lead to fewer offers and inefficiency in markets that involve matching, discrete transactions, and offers/proposals in both directions, such as the marriage market, certain types of labor markets, admissions to colleges and universities, and joint ventures and collaborations. We offer a simple model of this, and show that under some circumstances welfare can be improved by a mechanism that only reveals offers when both parties say "yes".

Suggested Citation

  • David Hugh-Jones & David Reinstein, 2010. "Losing Face," Jena Economic Research Papers 2010-068, Friedrich-Schiller-University Jena.
  • Handle: RePEc:jrp:jrpwrp:2010-068
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    File URL: http://pubdb.wiwi.uni-jena.de/pdf/wp_2010_068.pdf
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Tor Eriksson & Lei Mao & Marie Claire Villeval, 2017. "Saving face and group identity," Experimental Economics, Springer;Economic Science Association, vol. 20(3), pages 622-647, September.
    2. Goltsman, Maria & Pavlov, Gregory, 2014. "Communication in Cournot oligopoly," Journal of Economic Theory, Elsevier, vol. 153(C), pages 152-176.

    More about this item

    Keywords

    Matching; marriage markets; anonymity; reputation; adverse selection; Bayesian games; emotions.;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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