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Sprint projectOct 26, 2026Hong Kong

When Subsidies Backfire: The Budget–Audit Frontier for Collusion-Resistant Procurement

Xianrun Chen, Ziqi Zhao · Team G2

Submitted to AI Collusion Research Sprint. Sprint projects are early-stage work by participants, not Apart Research publications.

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Report: When Subsidies Backfire: The Budget–Audit Frontier for Collusion-Resistant Procurement

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Loser subsidies can discourage an agent from capturing a task, yet reward a coalition for manipulating the winning bid. We derive the exact tradeoff between payment budgets and worst-case auditing in procurement with a fixed winner award and trusted cost verification. Balancing capture and subsidy amplification yields an optimal capped-linear subsidy and a budget threshold beyond which further spending cannot reduce auditing. In 54 prescribed-witness games, model agents attain every exact finite-action payoff maximum, with larger budgets reducing capture gains and increasing amplification gains under reduced auditing. A separate repeated-game dataset shows that negative aggregate gains can conceal profitable pair-level deviations. The mechanism result and the payoff diagnostic connect two tasks in evaluating collusion: preventing joint deviations and measuring their consequences for coalition members, the sponsor, and execution cost.

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Cite this project

@misc{chen2026subsidies,
  title = {{When Subsidies Backfire: The Budget–Audit Frontier for Collusion-Resistant Procurement}},
  author = {Xianrun Chen and Ziqi Zhao},
  year = {2026},
  month = oct,
  note = {Submitted to AI Collusion Research Sprint, an Apart Research Sprint},
  howpublished = {\url{https://apartresearch.com/sprints/projects/when-subsidies-backfire-the-budgetaudit-frontier-for-collusionresistant-procurement-1l3s}},
  url = {https://apartresearch.com/sprints/projects/when-subsidies-backfire-the-budgetaudit-frontier-for-collusionresistant-procurement-1l3s}
}

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