Less so psychology, moreso basic deduction.
To avoid an argument I'll put it in simple terms. Your character was named "The Villain" and hence it's assumed that most characters, by default would refer to him as 'The Villain'. It is, to a different magnitude, the same as someone might perceive a guy known as "Boris the Cruel" or something like that.
You can't expect people to treat everyone they meet with complete honesty and impartiality. If the warning signs are there, people will take heed.