Evaluating LLM Agent Collusion in Double Auctions

Abstract: LLMs have demonstrated impressive capabilities as autonomous agents with rapidly expanding applications in various domains. As these agents increasingly engage in socioeconomic interactions, identifying their potential for undesirable behavior becomes essential. In this work, we examine scenarios where they can choose to collude, defined as secretive cooperation that harms another party. To systematically study this, we investigate the behavior of LLM agents acting as sellers in simulated continuous double auction markets. Through a series of controlled experiments, we analyze how parameters such as the ability to communicate, choice of model, and presence of environmental pressures affect the stability and emergence of seller collusion. We find that direct seller communication increases collusive tendencies, the propensity to collude varies across models, and environmental pressures, such as oversight and urgency from authority figures, influence collusive behavior. Our findings highlight important economic and ethical considerations for the deployment of LLM-based market agents.