In my last post, I outlined a number of theoretical problems that stand in the way of reputation being a substantial force for maintaining cooperation via indirect reciprocity. Just to recap them quickly: (1) reputational information is unlikely to be spread much via direct observation, (2) when it is spread, it's most likely to flow towards people who already have a substantial amount of direct interactions with the bearer of the reputation, and (3) reputational information, whether observed visually or transmitted through language, might often be inaccurate (due to manipulation or misperception) or non-diagnostic of an individual's future behavior, either in general or towards the observer. Now all of this is not to say that reputational information would be entirely useless in predicting the future behavior of others; just that it seems to be an unlikely force for sustaining cooperation in reality, despite what some philosophical intuitions written in the language of math might say. My goal today is to try and rescue reputation as a force to be reckoned with.
But what if part of what people are trying to assess isn't how that third party will behave towards them, but rather how that third party will behave towards their social allies. To clarify this point, let's take a simple example with three people: A, B, and X. Person A and B will represent you and your friend, respectively; person X will represent the third party. Now let's say that A and B have a healthy, mutually-cooperative relationship. Both A and B benefit form this relationship and have extensive histories with each other. Person B and X also have a relationship and extensive histories with one another, but this one is not nearly as cooperative; in fact, person X is downright exploitative over B. Given that A and X are otherwise unlikely to ever interact with each other directly, why would A care about what X does?
The answer to this question - or at least part of that answer - involves A and X interacting indirectly. This requires the addition of a simple assumption, however: the benefits that person B delivers to person A are contingent on person B's state. To make this a little less abstract, let's just use money. Person B has $10 and can invest that money with A. For every dollar that B invests, both players end up making two. If B invests all his money, then, both him and person A end up with $20. In the next round, B has his $10, but before he gets a chance to invest it with A, person X comes along and robs B of half of it. Now, person B only has $5 left to invest with A, netting them both $10. In essence, person X has now become person A's problem, even though the two never interacted. All this assumption does, then, is make clear the fact that people are interacting in a broader social context, rather than in a series of prisoner's dilemmas where your payoff only depends on your own, personal interactions.
That said, it does not take all the sting out. In the previous example, person A has a vested interest in making sure B is not exploited, which gives person B some leverage. Let's alter the example a bit, and say that person B can only invest $5 with person A during any given round; in that case, if X steals $5 from B's initial $10, it wouldn't affect person A at all. Since person B would rather not be exploited, they might wish to enlist A's help, but find person A less than eager to pitch in. This leaves person B with three options: first, B might just suck it up and suffer the exploitation. Alternative, B might consider withholding cooperation from A until A is willing to help out, similar to B going on a strike. If person B opts for this route, then all concerns for accuracy are gone; person A helping out is merely a precondition of maintaining B's cooperation. This strategy is risky for B, however, as it might look like exploitation from A's point of view. As this makes B a costlier interaction partner, person A might consider taking his business elsewhere, so to speak. This would leave B still exploited and out a cooperative partner.
There is another potential way around the issue, though: person B might attempt to persuade A that person X really was interfering in such a way that made B unable to invest; that is, person B might try to convince A that X had really stolen $8 instead of $5. If person B is successful in this task, it might still make him look like a costlier social investment, but not because he is himself attempting to exploit A. Person B looks like he really does want to cooperate, but is being prevented from doing so by another. In other words, B looks more like a true friend to A, rather than just a fair-weather one or an exploiter (Tooby & Cosmides, 1996). In this case, something like manifesting depression might work well for B to recruit support to deal with X (Hagen, 2003). Even if such behavior doesn't directly stop X from interfering in B's life, though, it might also prompt A to increase their investment in B to help maintain the relationship despite those losses. Either way, whether through avoiding costs or gaining benefits, B can leverage their value with A in these interactions and maintain their reputation as a cooperator.
References: Hagen, E.H. (2003). The bargaining model of depression. In: Genetic and Cultural Evolution of Cooperation, P. Hammerstein (ed.). MIT Press, 95-123
Copywrite: Jesse Marczyk