# Tacit Bidder-Side Collusion: Artificial Intelligence in Dynamic Auctions

arXiv: https://arxiv.org/abs/2511.21802 · HTML: https://mlsanity.com/paper/2511.21802/

## Key facts

- No citing papers in the map yet (data through 14 Oct 2026).
- Builds on 8 of its 43 references that are in the map.
- First posted on arXiv 26 Nov 2025.

## Builds on (most cited first, 8 of 8)

- [Language Models are Few-Shot Learners](https://mlsanity.com/paper/2005.14165/) (2020)
- [Training language models to follow instructions with human feedback](https://mlsanity.com/paper/2203.02155/) (2022)
- [Evaluating Large Language Models in Theory of Mind Tasks](https://mlsanity.com/paper/2302.02083/) (2023)
- [Playing repeated games with Large Language Models](https://mlsanity.com/paper/2305.16867/) (2023)
- [Secret Collusion among AI Agents: Multi-Agent Deception via Steganography](https://mlsanity.com/paper/2402.07510/) (2024)
- [Algorithmic Collusion by Large Language Models](https://mlsanity.com/paper/2404.00806/) (2024)
- [Artificial Intelligence and Auction Design](https://mlsanity.com/paper/2202.05947/) (2022)
- [Designing Auctions when Algorithms Learn to Bid](https://mlsanity.com/paper/2306.09437/) (2023)

## Abstract (arXiv)

We study whether large language models acting as autonomous bidders can tacitly collude by coordinating when to accept platform posted payouts in repeated Dutch auctions, without any communication. We present a minimal repeated auction model that yields a simple incentive compatibility condition and a closed form threshold for sustainable collusion for subgame-perfect Nash equilibria. In controlled simulations with multiple language models, we observe systematic supra-competitive prices in small auction settings and a return to competitive behavior as the number of bidders in the market increases, consistent with the theoretical model. We also find LLMs use various mechanisms to facilitate tacit coordination, such as focal point acceptance timing versus patient strategies that track the theoretical incentives. The results provide, to our knowledge, the first evidence of bidder side tacit collusion by LLMs and show that market structure levers can be more effective than capability limits for mitigation.