🚨Major new version🚨
Algorithmic Collusion by Large Language Models
Joint w/ @sarafish.bsky.social & @ranshorrer.bsky.social
LLMs are automating many business decisions. Pricing might be next (or is already).
What if multiple firms, in good faith, to use off-the-shelf-LLMs for pricing? 1/3
#EconSky
Algorithmic Collusion by Large Language Models
Joint w/ @sarafish.bsky.social & @ranshorrer.bsky.social
LLMs are automating many business decisions. Pricing might be next (or is already).
What if multiple firms, in good faith, to use off-the-shelf-LLMs for pricing? 1/3
#EconSky
Comments
LLM-based pricing agents autonomously collude:
1. quickly (~100 rounds)
2. even when not instructed to
3. certain terms and phrases lead to ~monopoly profits
4. also in auction settings
New version (novel off-path analysis):
Price-war concerns by LLMs are a significant contributor.
2/3
3/3
https://arxiv.org/abs/2404.00806
To what extent does it deserve its reputation in economics, and what would be some good guiding principles for researchers doing agent-based modeling using LLMs?
The distinctions are on which assumptions one makes about the agent's internal model, how it considers counterfactuals, etc.