The Poisoned Apple Effect: Strategic Manipulation of Mediated Markets via Technology Expansion of AI Agents

TL;DR

This paper explores how expanding AI technology options in markets can lead to strategic manipulation, affecting outcomes and regulatory fairness, exemplified by the 'Poisoned Apple' effect where technology release is used as a manipulation tool.

Contribution

It introduces the 'Poisoned Apple' effect, revealing how AI technology expansion can be exploited to manipulate market regulation and outcomes.

Findings

Expanding AI options shifts equilibrium payoffs and regulatory outcomes.

Agents can release unused technologies to influence regulator decisions.

Static regulations are vulnerable to manipulation through technology expansion.

Abstract

The integration of AI agents into economic markets fundamentally alters the landscape of strategic interaction. We investigate the economic implications of expanding the set of available technologies in three canonical game-theoretic settings: bargaining (resource division), negotiation (asymmetric information trade), and persuasion (strategic information transmission). We find that simply increasing the choice of AI delegates can drastically shift equilibrium payoffs and regulatory outcomes, often creating incentives for regulators to proactively develop and release technologies. Conversely, we identify a strategic phenomenon termed the "Poisoned Apple" effect: an agent may release a new technology, which neither they nor their opponent ultimately uses, solely to manipulate the regulator's choice of market design in their favor. This strategic release improves the releaser's welfare at the expense of their opponent and the regulator's fairness objectives. Our findings demonstrate that static regulatory frameworks are vulnerable to manipulation via technology expansion, necessitating dynamic market designs that adapt to the evolving landscape of AI capabilities.