Incentivizing User Data Contributions for LLM Improvement under Withdrawal Rights

Abstract

The continued improvement of large language models (LLMs) increasingly depends on eliciting high-quality, user-generated data, yet such data are costly to provide and often withheld due to privacy and effort concerns. This creates a fundamental design challenge: how to incentivize data contribution when model improvements require coordinated, threshold-level inputs, while contributions remain privately costly and partially reversible. We develop and theoretically analyze incentive mechanisms for user data contribution that explicitly account for threshold effects and reversibility, focusing on how subsidies and withdrawal rights can be jointly designed to overcome coordination failure. As a natural benchmark, we first consider subsidy-based incentives, under which users respond to posted payments with privately optimal floor contributions. These decentralized responses may fall below the improvement threshold, resulting in subsidy expenditure without model improvements. We then analyze mechanisms with withdrawal rights, in which users report costs, the provider centrally assigns contribution burdens, and users may withdraw before training. We prove that combining cost reporting with personalized assignment can eliminate inefficient provision by ensuring that data are collected only when improvement is sustainable, converting infeasible instances into a null outcome rather than subsidy leakage. Finally, we compare two withdrawal protocols. The simultaneous protocol can achieve lower total cost, while the small-first sequential protocol better incentivizes participation, encouraging greater data provision and thereby increasing the probability of crossing the improvement threshold.