  One of the virtues of peer review is that it provides a self-regulating
selection mechanism for scientific work, papers and projects. Peer review as a
selection mechanism is hard to evaluate in terms of its efficiency. Serious
efforts to understand its strengths and weaknesses have not yet lead to clear
answers. In theory peer review works if the involved parties (editors and
referees) conform to a set of requirements, such as love for high quality
science, objectiveness, and absence of biases, nepotism, friend and clique
networks, selfishness, etc. If these requirements are violated, what is the
effect on the selection of high quality work? We study this question with a
simple agent based model. In particular we are interested in the effects of
rational referees, who might not have any incentive to see high quality work
other than their own published or promoted. We find that a small fraction of
incorrect (selfish or rational) referees can drastically reduce the quality of
the published (accepted) scientific standard. We quantify the fraction for
which peer review will no longer select better than pure chance. Decline of
quality of accepted scientific work is shown as a function of the fraction of
rational and unqualified referees. We show how a simple quality-increasing
policy of e.g. a journal can lead to a loss in overall scientific quality, and
how mutual support-networks of authors and referees deteriorate the system.
