Ads in AI Chatbots? An Analysis of How Large Language Models Navigate Conflicts of Interest

Large language models (LLMs) are trained to align with user preferences through methods like reinforcement learning. Yet models are beginning to be deployed not solely to satisfy users, but to generate revenue for the companies that created them through advertisements. This creates the potential for LLMs to face conflicts of interest, where the most beneficial response to a user may not be aligned with the company's incentives. For instance, a sponsored product may be more expensive but otherwise equal to another; here, what does (and should) the LLM recommend to the user? In this paper, we provide a framework for categorizing the ways in which conflicting incentives might change how LLMs interact with users, inspired by literature from linguistics and advertising regulation. We then present a suite of evaluations to examine how current models handle these tradeoffs. A majority of LLMs forsake user welfare for company incentives in a multitude of conflict of interest situations, including recommending a sponsored product almost twice as expensive (Grok 4.1 Fast, 83\%), surfacing sponsored options to disrupt the purchasing process (GPT 5.1, 94\%), and concealing prices in unfavorable comparisons (Qwen 3 Next, 24\%). Behaviors vary strongly with levels of reasoning and users' inferred socio-economic status. Our results highlight some hidden risks to users that can emerge when companies begin to subtly incentivize advertisements in chatbots.