Leniency Exposes but Does Not Deter: A Sting Experiment on Collusion Among LLM Agents in Liar's Bar

Leniency programs (sparing the first cartel member to confess) are among the most effective tools against human cartels. I test whether the same rule applies to LLM agents. In a four-player game of Liar's Bar, an undercover agent privately offers each of the remaining players a pact never to challenge one another. A referee catches the pact with 5% probability per round, and every member then loses points. I compare four conditions over 10 seed-paired games each, with Llama-3.3-70B in every seat: no reporting, leniency for the first reporter known from round 1, leniency announced at round 4, and leniency plus a +3 reward announced at round 4. Leniency did not deter collusion: 59-69% of offered agents accepted the pact in every condition. It did, however, expose pacts. Games exposed by a report rose from 0/10 without reporting to 10/10 when leniency was known from the start, and to 7/10 and 5/10 when it was announced later, while members kept the pact for only 2.0 rounds on average instead of 4.9. Agents who refused the deal reported far more often than members, and the reward did not increase reporting.