Non-coercive extortion in game theory

TL;DR

This paper introduces a non-coercive extortion mechanism in game theory using outcome-contingent commitments, revealing vulnerabilities in strategic interactions and broadening understanding of commitment-based influence.

Contribution

It presents a novel extortion scheme leveraging commitments and sequentiality, expanding the scope of strategic manipulation beyond traditional coercive methods.

Findings

Extortion can be achieved through outcome-contingent rewards.

Sequentiality in games enables successful extortion strategies.

Vulnerabilities exist in simple 2x2 strategic settings.

Abstract

Commitments play a crucial role in game theory, shaping strategic interactions by either altering a player's own payoffs or influencing the incentives of others through outcome-contingent payments. While most research has focused on using commitments to achieve efficient equilibria, their potential applications beyond this goal remain largely unexplored. In this study, we introduce a non-coercive extortion mechanism that leverages commitments to outcome-contingent payments, demonstrating how a player or external agent can extract profit by offering rewards rather than threatening punishment. At the core of the mechanism is the introduction of sequentiality into a simultaneous-move game, fundamentally reshaping the strategic interaction. We derive the conditions under which extortion is successful, identify the class of games susceptible to this scheme, and determine both the maximum extractable profit and the minimum required payment. To illustrate the extortion mechanism, we apply it to 2x2 games, highlighting how even simple strategic settings can be vulnerable to this form of manipulation. Our results reveal strategic vulnerabilities in competitive settings, with significant implications for economic markets, diplomatic relations, and multi-agent systems operating in blockchain environments. This work broadens our understanding of commitments in game theory and raises critical questions about how to safeguard strategic interactions from exploitation through non-coercive extortion.