Incentives and co-evolution: Steering linear dynamical systems with noncooperative agents

Abstract: Modern socio-technical systems typically consist of many interconnected users and competing service providers, where notions like market equilibrium are tightly connected to the ``evolution'' of the network of users. In this paper, we model the users' dynamics as a linear dynamical system, and the service providers as agents taking part to a generalized Nash game, whose outcome coincides with the input of the users' dynamics. We thus characterize the notion of co-evolution of the market and the network dynamics and derive dissipativity-based conditions leading to a pertinent notion of equilibrium. We then focus on the control design and adopt the light-touch policy to incentivize or penalize the service providers as little as possible, while steering the networked system to a desirable outcome. We also provide a dimensionality-reduction procedure, which offers network-size independent conditions. Finally, we illustrate our novel notions and algorithms on a simulation setup stemming from digital market regulations for influencers, a topic of growing interest.