  Deception plays a critical role in the financial industry, online markets,
national defense, and countless other areas. Understanding and harnessing
deception - especially in cyberspace - is both crucial and difficult. Recent
work in this area has used game theory to study the roles of incentives and
rational behavior. Building upon this work, we employ a game-theoretic model
for the purpose of mechanism design. Specifically, we study a defensive use of
deception: implementation of honeypots for network defense. How does the design
problem change when an adversary develops the ability to detect honeypots? We
analyze two models: cheap-talk games and an augmented version of those games
that we call cheap-talk games with evidence, in which the receiver can detect
deception with some probability. Our first contribution is this new model for
deceptive interactions. We show that the model includes traditional signaling
games and complete information games as special cases. We also demonstrate
numerically that deception detection sometimes eliminate pure-strategy
equilibria. Finally, we present the surprising result that the utility of a
deceptive defender can sometimes increase when an adversary develops the
ability to detect deception. These results apply concretely to network defense.
They are also general enough for the large and critical body of strategic
interactions that involve deception.
