This paper considers the problem of how to allocate power among competing users sharing a frequency-selective interference channel. We model the interaction between selfish users as a non-cooperative game. As opposed to the existing iterative water-filling algorithm that studies the myopic users, this paper studies how a foresighted user, who knows the channel state information and response strategies of its competing users, should optimize its transmission strategy. To characterize this multi-user interaction, the Stackelberg equilibrium is introduced, and the existence of this equilibrium for the investigated non-cooperative game is shown. We analyze this interaction in more detail using a simple two-user example, where the foresighted user determines its transmission strategy by solving as a bi-level program which allows him to account for the myopic users response. It is analytically shown that a foresighted user can improve its performance, if it has the necessary information about its competitors. Since the optimal solution of Stackelberg equilibrium is computationally prohibitive, we propose a practical low-complexity approach based on Lagrangian duality theory. Numerical simulations verify the performance improvements. Possible ways to acquire the required information and to extend the formulation to more than two users are also discussed.
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