Alignment by Stereotyping: How LLMs Sacrifice Individual Distinctiveness for Cultural Adaptation

Large language models are increasingly deployed for personalized interaction, and demographic conditioning via user profiles is a widely adopted strategy for cultural adaptation. We ask whether this approach genuinely serves individual users or achieves accuracy by erasing individual distinctiveness. Studying seven models including frontier GPT-5.1 on the World Values Survey, we find that demographic profiles improve value alignment accuracy for most models, but at a systematic cost to individuality. That is, models pull responses toward demographic group centroids rather than preserving individual differences, a behavioral pattern we term alignment by stereotyping. Permutation tests (10,000 permutations, six demographic attributes, seven models) certify that top-performing models compress individuals far above the human baseline; within-family scaling amplifies this tradeoff while degrading intrinsic cultural understanding. Using a synthetic dialogue dataset validated on real human-chatbot conversations from PRISM (Kirk et al., 2024), we further show that distributing demographic signals across conversational turns partially suppresses prototype retrieval compared to compact demographic labels, a finding validated on real conversations via PRISM but requiring replication at larger scale.