In recent years, integrated circuits (ICs) have become significant for various industries and their securityhas been given greater priority, specifically in the supply chain. Budgetary constraints have compelled IC designersto offshore manufacturing to third-party companies. When the designer gets the manufactured ICs back, it isimperative to test for potential threats like hardware trojans (HT). In this paper, a novel multi-level game-theoreticframework is introduced to analyze the interactions between a malicious IC manufacturer and the tester for the ICdesigner. In particular, the game is formulated as a non-cooperative, zero-sum, repeated game using prospect theory(PT) that captures different players’ rationalities under uncertainty. The repeated game is separated into a learningstage, in which the defender learns about the attacker’s tendencies, and an actual game stage, where this learningis used. Experiments show great incentive for the attacker to deceive the defender about their actual rationality by“playing dumb” in the learning stage (deception). This scenario is captured using hypergame theory to model theattacker’s view of the game. The optimal deception rationality of the attacker is analytically derived to maximize utilitygain. For the defender, a first-step deception mitigation process is proposed to thwart the effects of deception.Simulation results show that the attacker can profit from the deception as it can successfully insert HTs in themanufactured ICs without being detected.