arXiv AI By Jan Sobotka, Mustafa O. Karabag, Ufuk Topcu

Why Do LLMs Struggle in Strategic Play? Broken Links Between Observations, Beliefs, and Actions

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The paper investigates why large language models (LLMs) struggle in strategic decision-making under incomplete information. It identifies two key gaps: an observation‑belief gap where LLMs’ internal representations of game states are accurate but brittle, and a belief‑action gap where converting these internal beliefs into actions is weak, leading to suboptimal payoffs. Experiments with Llama 3.1, Qwen3, and gpt‑oss confirm that acting optimally on decoded beliefs would improve outcomes in most games, highlighting a bottleneck in belief‑to‑action conversion.

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