Abstract

We investigate a phenomenon which we have experienced as common when dealing with an assortment of Italian public and private institutions: people promise to exchange high-quality goods and services, but then something goes wrong and the quality delivered is lower than had been promised. While this is perceived as ‘cheating’ by outsiders, insiders seem not only to adapt to, but to rely on this outcome. They do not resent low-quality exchanges; in fact, they seem to resent high-quality ones, and are inclined to put pressure on or avoid dealing with agents who deliver high quality. The equilibrium among low-quality producers relies on an unusual preference ranking which differs from that associated with the Prisoners’ Dilemma and similar games, whereby self-interested rational agents prefer to dish out low quality in exchange for high quality. While equally ‘lazy’, agents in our low-quality worlds are oddly ‘pro-social’: for the advantage of maximizing their raw self-interest, they prefer to receive low-quality goods and services, provided that they too can in exchange deliver low quality without embarrassment. They develop a set of oblique social norms to sustain their preferred equilibrium when threatened by the intrusion of high quality. We argue that high-quality collective outcomes are endangered not only by self-interested individual defectors, but by ‘cartels’ of mutually satisfied mediocrities