Incentivizing Data Trading via Profit Reallocation
It addresses the lack of economic incentives in data markets, a bottleneck for data circulation, by introducing a mechanism that benefits upstream sellers from downstream resales.
The paper proposes a profit reallocation mechanism for data trading that accounts for data resale, and shows it increases transaction volume by 120% and social welfare by 50.4% in synthetic environments.
Data trading is a central approach to data circulation, yet data markets remain far less active than expected. A primary bottleneck is the lack of effective economic incentives. Existing approaches often treat data as traditional goods, overlooking its inherent replicability and resale potential: buyers can replicate and resell data products, thereby forming transaction chains. Upstream sellers do not benefit from downstream resales and thus have limited incentives to sell. However, the impact of data resale on market performance remains insufficiently understood. To address this gap, we propose a sequential, chain-based data trading model that explicitly captures data resale. The model reflects data flows in settings such as LLM training and strategic decision-making. We integrate this model with a profit reallocation mechanism. By reallocating profits along the transaction chain, this mechanism ensures upstream sellers benefit from downstream resales. We next develop efficient algorithms, including a polynomial-time exact algorithm for the discrete model and an FPTAS for the continuous model, to compute its sequential equilibria. We theoretically show that profit reallocation expands trade and improves social welfare under certain conditions, and empirical results demonstrate that our mechanism increases transaction volume by 120.0\% and social welfare by 50.4\% in synthetic environments, compared with the baseline mechanism that does not reallocate profits.