It's amazing how good humans are at this sort of thing, by instinct. I'm reading the book Hierarchy in the Forrest, which is about tribal bands of humans up to 100k years ago. Without law and social structure, they basically solved all of their social equality problems by game theory. And depending on when precisely you think they evolved this social dynamic, they may have had hundreds of thousands of years to perfect it before we became hierarchical again.

http://www.amazon.com/Hierarchy-Forest-Evolution-Egalitarian-Behavior/dp/0674006917

If you look at rationality on a spectrum, this type of game theory isn't on the most enlightened/sophisticated form of it. Thugs, bullies, despots and drama queens are very good at this sort of manipulation. Rather it's basically the most primitive instinctive part of human reasoning.

However, that's not to say it doesn't work. The original post's description of not wanting to look yourself in the mirror afterwards is very apt.