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The idea behind the "Looking-glass" theory, or looking-glass self, was created by Charles Horton Cooley (1902). This idea states that one's identity is the result of interpersonal interactions (contact with other people) and the perceptions of others. In a sense, each person is the reflection of what others believe him or her to be. Therefore, the individual is a combination of all the perceptions (can be difficult) or changes his or her behavior to match the perception of the person nearest them at that particular moment.
For example, if a person is constantly hushed, dismissed, or ignored, he or she will not think very highly of himself or herself. This person will begin to believe that he or she has nothing to offer to others. This person will possess a very low self-concept (based upon how others perceive him or her). As a result, this person may look at others as being more important than he or she. This perception is created out of the belief that others are far more important because they get to talk and the individual does not.
As for a problem with the looking-glass theory, people are judged by many people. There will come a time where the perceptions of the individual contradict each other. At this point, the individual must decide which "persona" to display (but only when different people who have different perceptions are around the individual at the same time).
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