Paying for Honesty Without Knowing the Truth: Reputation-Penalty Design for LLM Marketplace Agents
On the map: LLM agents and tool use → Financial trading and forecasting agents
Abstract (arXiv)
LLM agents increasingly act as autonomous merchants that write their own product listings, and under competitive pressure, they fabricate attributes to win sales. Even under instructions to be honest, they fabricate attributes in a majority of listings across models. A platform's obvious remedy---verifying each claim against the truth---is unavailable, because it observes only a noisy, biased complaint signal, never the ground truth. We design CARP, a reputation-penalty mechanism with a deadband that forgives complaint noise and a state-dependent severity that counters reputation-driven detection erosion. CARP requires no product-level ground truth and is robust to strategic gaming. CARP protects consumers by suppressing the sales volume of low-rated liars while sparing honest sellers. Paired with SPARC, it closes most of the consumer-welfare gap relative to a perfect-information oracle, without ever accessing the truth. It also achieves the best welfare of the policies we compare. We further show that this felt penalty becomes behaviorally binding through SPARC, a byte-clean code-gated reflection mechanism: LLM merchants fabricate when lying is free but restrain themselves when fabrication costs them sales, a self-interested response rather than compliance. We trace this distinction to penalty-gated self-correction reasoning, and observe the binding across models, with supporting confidence intervals.
Key facts. Cited by 1 paper in the map (data through 7 Oct 2026). Placed in Financial trading and forecasting agents, one of 16 directions in LLM agents and tool use. Builds on 12 of its 42 references that are in the map. First posted on arXiv 30 Jul 2026.
Builds on
12 of 42 references.
Closest ancestors · 2
Same direction, newest first
- 2025Magentic Marketplace: An Open-Source Environment for Studying Agentic Markets27 Oct
- 2025Evaluating LLM Agent Collusion in Double Auctions2 Jul
Other references · 10
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- 2023Generative Agents: Interactive Simulacra of Human Behaviorcited by 3,500
- 2025MultiAgentBench: Evaluating the Collaboration and Competition of LLM agentscited by 169
- 2023EconAgent: Large Language Model-Empowered Agents for Simulating Macroeconomic Activitiescited by 154
- 2025Evaluation and Benchmarking of LLM Agents: A Surveycited by 145
- 2023Large Language Models can Strategically Deceive their Users when Put Under Pressurecited by 132
- 2023Cooperation, Competition, and Maliciousness: LLM-Stakeholders Interactive Negotiationcited by 94
- 2024AI-LieDar: Examine the Trade-off Between Utility and Truthfulness in LLM Agentscited by 28
- 2016Temporal Opinion Spam Detection by Multivariate Indicative Signalscited by 2
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Citing papers per year: 2026: 1.
1 paper.
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Close in wording, no citation either way
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