Contagion or restitution? When bad apples can motivate ethical behavior

When there is a "bad apple" in the group, are we more likely to follow the example or compensate for their sins? Three experiments showed that whether a group member's unethical actions lead to contagion or restitution depends on the presence of out-group observers. In Experiment 1, participants were more likely to compensate for the transgression of an in-group member than an out-group member when there were out-group observers. Experiment 2 varied the presence of out-group observers and showed that such compensatory behaviors occur only in the presence of out-group members. We suggest that the presence of out-group observers trigger a self-categorization process that induces guilt in individuals for their group members' transgressions. Indeed, associated guilt mediated the relationship between in-group member's unethical behavior and participants' compensatory behavior (Experiment 3). These results suggest that norms implied by others' behavior and group categorization are important determinants of ethical behavior.