Incentivizing Quality Text Generation via Statistical Contracts
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Abstract (arXiv)
While the success of large language models (LLMs) increases demand for machine-generated text, current pay-per-token pricing schemes create a misalignment of incentives known in economics as moral hazard: Text-generating agents have strong incentive to cut costs by preferring a cheaper model over the cutting-edge one, and this can be done "behind the scenes" since the agent performs inference internally. In this work, we approach this issue from an economic perspective, by proposing a pay-for-performance, contract-based framework for incentivizing quality. We study a principal-agent game where the agent generates text using costly inference, and the contract determines the principal's payment for the text according to an automated quality evaluation. Since standard contract theory is inapplicable when internal inference costs are unknown, we introduce cost-robust contracts. As our main theoretical contribution, we characterize optimal cost-robust contracts through a direct correspondence to optimal composite hypothesis tests from statistics, generalizing a result of Saig et al. (NeurIPS'23). We evaluate our framework empirically by deriving contracts for a range of objectives and LLM evaluation benchmarks, and find that cost-robust contracts sacrifice only a marginal increase in objective value compared to their cost-aware counterparts.
Key facts. Cited by 10 papers in the map (data through 14 Oct 2026). Builds on 31 of its 42 references that are in the map. First posted on arXiv 17 Jun 2024.
Builds on
31 of 42 references.
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Citing papers per year: 2025: 7; 2026: 3.
10 papers.
- 2025Game Theory Meets Large Language Models: A Systematic Survey with Taxonomy and New Frontierscited by 16
- 2025Is Your LLM Overcharging You? Tokenization, Transparency, and Incentivescited by 13
- 2025Pay for The Second-Best Service: A Game-Theoretic Approach Against Dishonest LLM Providerscited by 6
- 2025Auditing Pay-Per-Token in Large Language Modelscited by 4
- 2026Reward Shaping for (Inference-Time) Alignment: A Stackelberg Game Perspectivecited by 2
- 2026Computational Arbitrage in AI Model Marketscited by 1
- 2025Incentivizing High-Quality Human Annotations with Golden Questionscited by 0
- 2025Tokenization Multiplicity Leads to Arbitrary Price Variation in LLM-as-a-servicecited by 0
- 2025Users as Annotators: LLM Preference Learning from Comparison Modecited by 0
- 2026Adaptive Contracts for Cost-Effective AI Delegationcited by 0
- 2026Computational Arbitrage in AI Model Markets23 Mar 2026
- 2026Adaptive Contracts for Cost-Effective AI Delegation17 Mar 2026
- 2026Reward Shaping for (Inference-Time) Alignment: A Stackelberg Game Perspective31 Jan 2026
- 2025Pay for The Second-Best Service: A Game-Theoretic Approach Against Dishonest LLM Providers2 Nov 2025
- 2025Users as Annotators: LLM Preference Learning from Comparison Mode10 Oct 2025
- 2025Auditing Pay-Per-Token in Large Language Models5 Oct 2025
- 2025Tokenization Multiplicity Leads to Arbitrary Price Variation in LLM-as-a-service6 Jun 2025
- 2025Is Your LLM Overcharging You? Tokenization, Transparency, and Incentives27 May 2025
- 2025Incentivizing High-Quality Human Annotations with Golden Questions25 May 2025
- 2025Game Theory Meets Large Language Models: A Systematic Survey with Taxonomy and New Frontiers13 Feb 2025