Incentive Design for Multi-Agent Systems: A Bilevel Optimization Framework for Coordinating Independent Agents and Convergence Analysis

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Incentive design aims to guide the performance of a system towards a human's intention or preference. We study this problem in a multi-agent system with one leader and multiple followers. Each follower independently solves a mdp to maximize its own expected total return with the same state space and action space. However, the leader's objective depends on the collective best-response policies of all followers. To influence these policies of followers, the leader provides side payments as incentives to individual followers at a cost, aiming to align the collective behaviors of followers with its own goal while minimizing this cost of incentive. Such a leader-followers interaction is formulated as a bilevel optimization problem: the lower level consists of followers individually optimizing their MDPs given the side payments, and the upper level involves the leader optimizing its objective function given the followers' best responses. The main challenge to solve the incentive design is that the leader's objective is generally non-concave and the lower level optimization problems can have multiple local optima. To this end, we employ a constrained optimization reformation of this bi-level optimization problem and develop an algorithm that provably converges to a stationary point of the original problem, by leveraging several smoothness properties of value functions in MDPs. We validate our algorithm in a stochastic gridworld by examining its convergence, verifying that the constraints are satisfied, and evaluating the improvement in the leader's performance.