Interesting paper evaluates the mathematical flaws in reputation systems: if the right thing to do would seem suspicious, then reputation systems encourage you to do the wrong thing, to enhance your reputation.
Recall that an action is vulnerable to a temptation if when the short-run players participate, the temptation lowers the probability of all bad signals, and increases the probability of all others. In this case the bad reputation result requires the exit minmax condition, as demonstrated by the example in Section 4.4. Notice, however, that in the example the relative probability of g and r is changed by the temptation. If the temptation satisfies the stronger property that the relative probability of the other signals remains constant, then we can weaken the assumption of exit minmax. In this section we develop this result, and give an application to games with two actions.
(If the math is too dense, there's a good lay explanation here)
(via Smartmobs)
