AI Traders Autonomously Collude, Undermining Market Efficiency
Summary
AI-powered trading algorithms autonomously learn and sustain collusive strategies without explicit agreement or intent, undermining competition and market efficiency in financial markets.
Key Points
- AI-powered trading integrates algorithmic trading with reinforcement learning, transforming financial markets.
- AI speculators autonomously sustain collusive supra-competitive profits without agreement, communication, or intent, undermining competition and market efficiency.
- Two separate mechanisms underlie this collusion: one arises from AI speculators' ability to learn collusive strategies, and the other from their ability to coordinate through public signals.