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Games with Espionage

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  • Eilon Solan
  • Leeat Yariv

Abstract

"There is no place where espionage is not possible." -Sun Tzu, The Art of War, approximately 500BC We consider extensive form games in which players decide on their strategies before the start of play and can purchase noisy information about their opponents' decisions concerning future response policies (i.e., spy on their opponents' decisions). This addition to the agent's optimization problem naturally changes the set of subgame perfect equilibria (SPE). For example, in the chain-store model, for sufficiently small costs of espionage, the population of Incumbents splits into a positive fraction that accommodates and a positive fraction that fights. For general 2x2 games in extensive form, the existence of equilibria with espionage turns out to depend on the difference between the Stackelberg equilibrium payoffs and the SPE payoffs. We characterize the set of equilibria with espionage as a sunset of the set of correlated equilibria. Welfare and Pareto properties of such equilibria are also explored.

Suggested Citation

  • Eilon Solan & Leeat Yariv, 1998. "Games with Espionage," Discussion Papers 1257, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    • Handle: RePEc:nwu:cmsems:1257
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    3. Tao Wang, 2020. "Competitive Intelligence and Disclosure of Cost Information in Duopoly," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(3), pages 665-699, November.
    4. Jonas Send, 2021. "Contest Copycats: Adversarial Duplication of Effort in Contests," Working Papers tax-mpg-rps-2021-17, Max Planck Institute for Tax Law and Public Finance.
    5. Shirley Ho, 2007. "An Economic Analysis Of Military Intelligence," Defence and Peace Economics, Taylor & Francis Journals, vol. 18(6), pages 485-493.
    6. Po-Lu Chen, 2016. "Cross-Country Economic Espionage and Investment in Research and Development," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(4), pages 146-155, April.
    7. Cuihong Fan & Byoung Heon Jun & Elmar G. Wolfstetter, 2023. "Spying and imperfect commitment in first-price auctions: a case of tacit collusion," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(2), pages 255-275, October.
    8. Hans Reijnierse & Peter Borm & Mark Voorneveld, 2007. "On ‘Informationally Robust Equilibria’ for Bimatrix Games," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 30(3), pages 539-560, March.
    9. Tommaso Denti & Massimo Marinacci & Aldo Rustichini, 2022. "Experimental Cost of Information," American Economic Review, American Economic Association, vol. 112(9), pages 3106-3123, September.
    10. repec:ebl:ecbull:v:3:y:2005:i:18:p:1-4 is not listed on IDEAS
    11. Van Gorder, Robert A. & Caputo, Michael R., 2010. "Envelope theorems for locally differentiable open-loop Stackelberg equilibria of finite horizon differential games," Journal of Economic Dynamics and Control, Elsevier, vol. 34(6), pages 1123-1139, June.
    12. Florian Gauer & Christoph Kuzmics, 2020. "Cognitive Empathy In Conflict Situations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(4), pages 1659-1678, November.
    13. Lee, Natalie, 2023. "Feigning ignorance for long-term gains," Games and Economic Behavior, Elsevier, vol. 138(C), pages 42-71.
    14. Cuihong Fan & Byoung Heon Jun & Elmar G. Wolfstetter, 2023. "Price leadership, spying, and secret price changes: a Stackelberg game with imperfect commitment," International Journal of Game Theory, Springer;Game Theory Society, vol. 52(3), pages 775-804, September.
    15. Barrachina, Alex & Tauman, Yair & Urbano, Amparo, 2014. "Entry and espionage with noisy signals," Games and Economic Behavior, Elsevier, vol. 83(C), pages 127-146.
    16. Valerio Capraro & Joseph Y Halpern, 2019. "Translucent players: Explaining cooperative behavior in social dilemmas," Rationality and Society, , vol. 31(4), pages 371-408, November.
    17. Kathryn Merrick & Medria Hardhienata & Kamran Shafi & Jiankun Hu, 2016. "A Survey of Game Theoretic Approaches to Modelling Decision-Making in Information Warfare Scenarios," Future Internet, MDPI, vol. 8(3), pages 1-29, July.
    18. Heller, Yuval & Mohlin, Erik, 2015. "Stable Observable Behavior," MPRA Paper 63013, University Library of Munich, Germany.
    19. D. Thorleuchter & D. Van Den Poel, 2012. "Protecting Research and Technology from Espionage," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/824, Ghent University, Faculty of Economics and Business Administration.
    20. Fan, Cuihong & Jun, Byoung Heon & Wolfstetter, Elmar G., 2022. "Spying in Bertrand markets under incomplete information: Who benefits and is it stable?," Journal of Mathematical Economics, Elsevier, vol. 102(C).
    21. Cuihong Fan & Byoung Heon Jun & Elmar G. Wolfstetter, 2019. "Induced Price Leadership and (Counter-)Spying Rivals' Play under Incomplete Information," CESifo Working Paper Series 7476, CESifo.
    22. S. Ho, 2008. "Extracting the information: espionage with double crossing," Journal of Economics, Springer, vol. 93(1), pages 31-58, February.
    23. Joseph Y. Halpern & Rafael Pass, 2018. "Game theory with translucent players," International Journal of Game Theory, Springer;Game Theory Society, vol. 47(3), pages 949-976, September.

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    Keywords

    Espionage; subgame perfect equilibria; information; timing.;
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