# Incentive-Aware Multi-Fidelity Optimization for Generative Advertising in Large Language Models

arXiv: https://arxiv.org/abs/2604.06263 · HTML: https://mlsanity.com/paper/2604.06263/

## Key facts

- Cited by 1 papers in the map (data through 14 Oct 2026).
- Builds on 31 of its 51 references that are in the map.
- First posted on arXiv 7 Apr 2026.

## Builds on (most cited first, 30 of 31)

- [Language Models are Few-Shot Learners](https://mlsanity.com/paper/2005.14165/) (2020)
- [Training language models to follow instructions with human feedback](https://mlsanity.com/paper/2203.02155/) (2022)
- [Direct Preference Optimization: Your Language Model is Secretly a Reward Model](https://mlsanity.com/paper/2305.18290/) (2023)
- [Parameter-Efficient Transfer Learning for NLP](https://mlsanity.com/paper/1902.00751/) (2019)
- [Sparse Autoencoders Find Highly Interpretable Features in Language Models](https://mlsanity.com/paper/2309.08600/) (2023)
- [Model soups: averaging weights of multiple fine-tuned models improves accuracy without increasing inference time](https://mlsanity.com/paper/2203.05482/) (2022)
- [Plug and Play Language Models: A Simple Approach to Controlled Text Generation](https://mlsanity.com/paper/1912.02164/) (2019)
- [AdapterFusion: Non-Destructive Task Composition for Transfer Learning](https://mlsanity.com/paper/2005.00247/) (2020)
- [Hyperband: A Novel Bandit-Based Approach to Hyperparameter Optimization](https://mlsanity.com/paper/1603.06560/) (2016)
- [Scaling and evaluating sparse autoencoders](https://mlsanity.com/paper/2406.04093/) (2024)
- [Gemma Scope: Open Sparse Autoencoders Everywhere All At Once on Gemma 2](https://mlsanity.com/paper/2408.05147/) (2024)
- [GeDi: Generative Discriminator Guided Sequence Generation](https://mlsanity.com/paper/2009.06367/) (2020)
- [LoraHub: Efficient Cross-Task Generalization via Dynamic LoRA Composition](https://mlsanity.com/paper/2307.13269/) (2023)
- [Scaling Down to Scale Up: A Guide to Parameter-Efficient Fine-Tuning](https://mlsanity.com/paper/2303.15647/) (2023)
- [Multi-fidelity Bayesian Optimisation with Continuous Approximations](https://mlsanity.com/paper/1703.06240/) (2017)
- [Steering Language Model Refusal with Sparse Autoencoders](https://mlsanity.com/paper/2411.11296/) (2024)
- [Practical Multi-fidelity Bayesian Optimization for Hyperparameter Tuning](https://mlsanity.com/paper/1903.04703/) (2019)
- [Word Embeddings Are Steers for Language Models](https://mlsanity.com/paper/2305.12798/) (2023)
- [Optimal Auctions through Deep Learning: Advances in Differentiable Economics](https://mlsanity.com/paper/1706.03459/) (2017)
- [Complexity of Mechanism Design](https://mlsanity.com/paper/1408.1486/) (2014)
- [Automated Mechanism Design via Neural Networks](https://mlsanity.com/paper/1805.03382/) (2018)
- [A Permutation-Equivariant Neural Network Architecture For Auction Design](https://mlsanity.com/paper/2003.01497/) (2020)
- [Multi-fidelity Gaussian Process Bandit Optimisation](https://mlsanity.com/paper/1603.06288/) (2016)
- [Bridging Machine Learning and Mechanism Design towards Algorithmic Fairness](https://mlsanity.com/paper/2010.05434/) (2020)
- [Truthful Aggregation of LLMs with an Application to Online Advertising](https://mlsanity.com/paper/2405.05905/) (2024)
- [Auctions with LLM Summaries](https://mlsanity.com/paper/2404.08126/) (2024)
- [Differentiable Economics for Randomized Affine Maximizer Auctions](https://mlsanity.com/paper/2202.02872/) (2022)
- [GemNet: Menu-Based, Strategy-Proof Multi-Bidder Auctions Through Deep Learning](https://mlsanity.com/paper/2406.07428/) (2024)
- [Embedding-Aligned Language Models](https://mlsanity.com/paper/2406.00024/) (2024)
- [Teach Old SAEs New Domain Tricks with Boosting](https://mlsanity.com/paper/2507.12990/) (2025)

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

- [LLM Advertisement based on Neuron Auctions](https://mlsanity.com/paper/2605.08326/) (2026)

## Abstract (arXiv)

Generative advertising in large language model (LLM) responses requires optimizing sponsorship configurations under two strict constraints: the strategic behavior of advertisers and the high cost of stochastic generations. To address this, we propose the Incentive-Aware Multi-Fidelity Mechanism (IAMFM), a unified framework coupling Vickrey-Clarke-Groves (VCG) incentives with Multi-Fidelity Optimization to maximize expected social welfare. We compare two algorithmic instantiations (elimination-based and model-based), revealing their budget-dependent performance trade-offs. Crucially, to make VCG computationally feasible, we introduce Active Counterfactual Optimization, a "warm-start" approach that reuses optimization data for efficient payment calculation. We provide formal guarantees for approximate strategy-proofness and individual rationality, establishing a general approach for incentive-aligned, budget-constrained generative processes. Experiments demonstrate that IAMFM outperforms single-fidelity baselines across diverse budgets.