Deception in Oligopoly Games via Adaptive Nash Seeking Systems

TL;DR

This paper explores how adaptive Nash seeking systems in oligopoly markets can be manipulated for deception, revealing how players can steer outcomes toward deceptive equilibria while maintaining system stability.

Contribution

It extends deception analysis from duopoly to N-player oligopoly games, providing stability conditions and insights into how players can tune dynamics to induce deceptive equilibria.

Findings

Deceptive Nash equilibria can be stabilized in N-player oligopoly games.

Players can systematically adjust gains and signals to induce deception.

Deceptive dynamics may cause firms to misperceive competitors' product appeal.

Abstract

In the theory of multi-agent systems, deception refers to the strategic manipulation of information to influence the behavior of other agents, ultimately altering the long-term dynamics of the entire system. Recently, this concept has been examined in the context of model-free Nash equilibrium seeking (NES) algorithms for noncooperative games. Specifically, it was demonstrated that players can exploit knowledge of other players' exploration signals to drive the system toward a ``deceptive" Nash equilibrium, while maintaining the stability of the closed-loop system. To extend this insight beyond the duopoly case, in this paper we conduct a comprehensive study of deception mechanisms in N-player oligopoly markets. By leveraging the structure of these games and employing stability techniques for nonlinear dynamical systems, we provide game-theoretic insights into deception and derive specialized results, including stability conditions. These results allow players to systematically adjust their NES dynamics by tuning gains and signal amplitudes, all while ensuring closed-loop stability. Additionally, we introduce novel sufficient conditions to demonstrate that the (practically) stable equilibrium point of the deceptive dynamics corresponds to a true Nash equilibrium of a different game, which we term the ``deceptive game." Our results show that, under the proposed adaptive dynamics with deception, a victim firm may develop a distorted perception of its competitors' product appeal, which could lead to setting suboptimal prices.