# Cost-Aware Model Selection for Text Classification: Multi-Objective Trade-offs Between Fine-Tuned Encoders and LLM Prompting in Production

arXiv: https://arxiv.org/abs/2602.06370 · HTML: https://mlsanity.com/paper/2602.06370/

## Key facts

- Cited by 1 papers in the map (data through 14 Oct 2026).
- Builds on 17 of its 34 references that are in the map.
- First posted on arXiv 6 Feb 2026.

## Builds on (most cited first, 17 of 17)

- [BERT: Pre-training of Deep Bidirectional Transformers for Language Understanding](https://mlsanity.com/paper/1810.04805/) (2018)
- [Exploring the Limits of Transfer Learning with a Unified Text-to-Text Transformer](https://mlsanity.com/paper/1910.10683/) (2019)
- [Scaling Laws for Neural Language Models](https://mlsanity.com/paper/2001.08361/) (2020)
- [Efficient Memory Management for Large Language Model Serving with PagedAttention](https://mlsanity.com/paper/2309.06180/) (2023)
- [DistilBERT, a distilled version of BERT: smaller, faster, cheaper and lighter](https://mlsanity.com/paper/1910.01108/) (2019)
- [On the Opportunities and Risks of Foundation Models](https://mlsanity.com/paper/2108.07258/) (2021)
- [Axiomatic Attribution for Deep Networks](https://mlsanity.com/paper/1703.01365/) (2017)
- [Sparks of Artificial General Intelligence: Early experiments with GPT-4](https://mlsanity.com/paper/2303.12712/) (2023)
- [Character-level Convolutional Networks for Text Classification](https://mlsanity.com/paper/1509.01626/) (2015)
- [Energy and Policy Considerations for Deep Learning in NLP](https://mlsanity.com/paper/1906.02243/) (2019)
- [Atlas: Few-shot Learning with Retrieval Augmented Language Models](https://mlsanity.com/paper/2208.03299/) (2022)
- [Carbon Emissions and Large Neural Network Training](https://mlsanity.com/paper/2104.10350/) (2021)
- [Evaluation: from precision, recall and F-measure to ROC, informedness, markedness and correlation](https://mlsanity.com/paper/2010.16061/) (2020)
- [Measuring the Carbon Intensity of AI in Cloud Instances](https://mlsanity.com/paper/2206.05229/) (2022)
- [Fine-Tuned 'Small' LLMs (Still) Significantly Outperform Zero-Shot Generative AI Models in Text Classification](https://mlsanity.com/paper/2406.08660/) (2024)
- [Large Language Models For Text Classification: Case Study And Comprehensive Review](https://mlsanity.com/paper/2501.08457/) (2025)
- [Advancing Single and Multi-task Text Classification through Large Language Model Fine-tuning](https://mlsanity.com/paper/2412.08587/) (2024)

## Built on by (most cited first, 1 of 1)

- [The Embedder's Dilemma: LLMs Are Better, but at What Cost?](https://mlsanity.com/paper/2608.12875/) (2026)

## Abstract (arXiv)

Large language models (LLMs) such as GPT-4o and Claude Sonnet 4.5 have demonstrated strong capabilities in open-ended reasoning and generative language tasks, leading to their widespread adoption across a broad range of NLP applications. However, for structured text classification problems with fixed label spaces, model selection is often driven by predictive performance alone, overlooking operational constraints encountered in production systems. In this work, we present a systematic comparison of two contrasting paradigms for text classification: zero- and few-shot prompt-based large language models, and fully fine-tuned encoder-only architectures. We evaluate these approaches across four canonical benchmarks (IMDB, SST-2, AG News, and DBPedia), measuring predictive quality (macro F1), inference latency, and monetary cost. We frame model evaluation as a multi-objective decision problem and analyze trade-offs using Pareto frontier projections and a parameterized utility function reflecting different deployment regimes. Our results show that fine-tuned encoder-based models from the BERT family achieve competitive, and often superior, classification performance while operating at one to two orders of magnitude lower cost and latency compared to zero- and few-shot LLM prompting. Overall, our findings suggest that indiscriminate use of large language models for standard text classification workloads can lead to suboptimal system-level outcomes. Instead, fine-tuned encoders emerge as robust and efficient components for structured NLP pipelines, while LLMs are better positioned as complementary elements within hybrid architectures. We release all code, datasets, and evaluation protocols to support reproducibility and cost-aware NLP system design.