Doing Bad to Look Good

In this research we were tried to answer the following question – would people make “bad” decisions, namely conduct pareto-inefficient actions, to seem “good”. Such a thing is possible with imperfect information, when “experts”, who possess exclusive information, make ineffective decisions to preserve reputation or enhance their social image – their counterparty does not know the basis of their decisions, and thus might interpret their signals (decisions “experts” make) incorrectly. In this paper, we used an experiment conducted in Amsterdam by our colleagues and also conducted our own, improved and more complex experiment in Moscow, in order to try to answer this question and arising related questions. As a result, we conclude that social image plays a major role in the agents’ decision making process, altruism is a big factor as well, but prior relationships between counterparties does not seem to have a significant impact on the decisions.