1. Algorithmic Collusion by Large Language Models
- Author
-
Fish, Sara, Gonczarowski, Yannai A., and Shorrer, Ran I.
- Subjects
Economics - General Economics ,Computer Science - Artificial Intelligence ,Computer Science - Computer Science and Game Theory - Abstract
The rise of algorithmic pricing raises concerns of algorithmic collusion. We conduct experiments with algorithmic pricing agents based on Large Language Models (LLMs). We find that (1) LLM-based agents are adept at pricing tasks, (2) LLM-based pricing agents autonomously collude in oligopoly settings to the detriment of consumers, and (3) variation in seemingly innocuous phrases in LLM instructions ("prompts") may increase collusion. Novel off-path analysis techniques uncover price-war concerns as contributing to these phenomena. Our results extend to auction settings. Our findings uncover unique challenges to any future regulation of LLM-based pricing agents, and black-box pricing agents more broadly.
- Published
- 2024