Truthful Aggregation of LLMs with an Application to Online Advertising

Ermis Soumalias, Michael Curry, Sven Seuken

Keywords: Market Design, LLMs, Large Language Models, Auctions, Economics and Computation, LLM Aggregation, Online Advertising Auctions, Preference Aggregation

TL;DR: We create an ad auction mechanism for LLM-generated content that ensures truthful advertiser behavior, aligns utility with social welfare, and provably converges to optimal LLM outputs.

Abstract: The next frontier of online advertising is revenue generation from LLM-generated content. We consider a setting where advertisers aim to influence the responses of an LLM, while platforms seek to maximize advertiser value and ensure user satisfaction. The challenge is that advertisers' preferences generally conflict with those of the user, and advertisers may misreport their preferences. To address this, we introduce MOSAIC, an auction mechanism that ensures that truthful reporting is a dominant strategy for advertisers and that aligns the utility of each advertiser with their contribution to social welfare. Importantly, the mechanism operates without LLM fine-tuning or access to model weights and provably converges to the output of the optimally fine-tuned LLM as computational resources increase. Additionally, it can incorporate contextual information about advertisers, which significantly improves social welfare. Via experiments with publicly available LLMs, we show that MOSAIC leads to high advertiser value and platform revenue with low computational costs. While our motivating application is online advertising, our mechanism can be applied in any setting with monetary transfers, making it a general-purpose solution for truthfully aggregating the preferences of self-interested agents over LLM-generated replies.

Primary Area: Theory (e.g., control theory, learning theory, algorithmic game theory)

Submission Number: 18165