Simulating Price Collusion Between Agents & Undercover Sellers

LLM agents that set prices for competing sellers can coordinate when they can message each other. We ask whether this raises prices, and whether a seller working undercover for a market authority, or questioning after the market, can expose the sellers that collude. We built upon Magentic Marketplace (Bansal et al, 2025), utilizing a new scenario of four restaurant sellers and eight customers over five rounds. We provided sellers a way to communicate with each other. Sellers talked about prices, but prices still fell over the rounds, only slightly less than in the same market without messages. Prices end about 20% higher only when sellers are also told that agreeing is allowed and that a joint rise would still sell (nudged). We then placed one seller that secretly works for the market authority among the sellers. It kept its role hidden during the market, and when asked afterwards it named the colluding sellers with quotes from their messages. A seller without the role, asked the same question, named them just as well, and most colluding sellers confessed when told the authority had evidence. The collusion was easy to expose because sellers agreed in plain words and had nothing to lose by confessing.