Imitative Follower Deception in Stackelberg Games

Information uncertainty is one of the major challenges facing applications of game theory. In the context of Stackelberg games, various approaches have been proposed to deal with the leader's incomplete knowledge about the follower's payoffs, typically by gathering information from the leader's interaction with the follower. Unfortunately, these approaches rely crucially on the assumption that the follower will not strategically exploit this information asymmetry, i.e., the follower behaves truthfully during the interaction according to their actual payoffs. As we show in this paper, the follower may have strong incentives to deceitfully imitate the behavior of a different follower type and, in doing this, benefit significantly from inducing the leader into choosing a highly suboptimal strategy. This raises a fundamental question: how to design a leader strategy in the presence of a deceitful follower? To answer this question, we put forward a basic model of Stackelberg games with (imitative) follower deception and show that the leader is indeed able to reduce the loss due to follower deception with carefully designed policies. We then provide a systematic study of the problem of computing the optimal leader policy and draw a relatively complete picture of the complexity landscape; essentially matching positive and negative complexity results are provided for natural variants of the model. Our intractability results are in sharp contrast to the situation with no deception, where the leader's optimal strategy can be computed in polynomial time, and thus illustrate the intrinsic difficulty of handling follower deception. Through simulations we also examine the benefit of considering follower deception in randomly generated games

Deception in finitely repeated security games

Allocating resources to defend targets from attack is often complicated by uncertainty about the attacker’s capabilities, objectives, or other underlying characteristics. In a repeated interaction setting, the defender can collect attack data over time to reduce this uncertainty and learn an effective defense. However, a clever attacker can manipulate the attack data to mislead the defender, influencing the learning process toward its own benefit. We investigate strategic deception on the part of an attacker with private type information, who interacts repeatedly with a defender. We present a detailed computation and analysis of both players’ optimal strategies given the attacker may play deceptively. Computational experiments illuminate conditions conducive to strategic deception, and quantify benefits to the attacker. By taking into account the attacker’s deception capacity, the defender can significantly mitigate loss from misleading attack actions

Outsourcing induced by strategic competition

We show that intermediate goods can be sourced to firms on the "outside" (that do not compete in the final product market), even when there are no economies of scale or cost advantages for these firms. What drives the phenomenon is that "inside" firms, by accepting such orders, incur the disadvantage of becoming Stackelberg followers in the ensuing competition to sell the final product. Thus they have incentive to quote high provider prices to ward off future competitors, driving the latter to source outside

Outsourcing induced by strategic competition

We show that intermediate goods can be sourced to firms on the "outside" (that do not compete in the final product market), even when there are no economies of scale or cost advantages for these firms. What drives the phenomenon is that "inside" firms, by accepting such orders, incur the disadvantage of becoming Stackelberg followers in the ensuing competition to sell the final product. Thus they have incentive to quote high provider prices to ward off future competitors, driving the latter to source outside

Outsourcing induced by strategic competition

We show that intermediate goods can be sourced to firms on the "outside" (that do not compete in the final product market), even when there are no economies of scale or cost advantages for these firms. What drives the phenomenon is that "inside" firms, by accepting such orders, incur the disadvantage of becoming Stackelberg followers in the ensuing competition to sell the final product. Thus they have incentive to quote high provider prices to ward off future competitors, driving the latter to source outside