Modern AI systems increasingly operate inside markets and institutions where data, behavior, and incentives are endogenous. This paper develops an economic foundation for multi-agent learning by studying a principal-agent interaction in a Markov decision process with strategic externalities, where both the principal and the agent learn over time. We propose a two-phase incentive mechanism that first estimates implementable transfers and then uses them to steer long-run dynamics; under mild regret-based rationality and exploration conditions, the mechanism achieves sublinear social-welfare regret and thus asymptotically optimal welfare. Simulations illustrate how even coarse incentives can correct inefficient learning under stateful externalities, highlighting the necessity of incentive-aware design for safe and welfare-aligned AI in markets and insurance.

This paper explores the application of large language models (LLMs) in designing strategic mechanisms -- including auctions, contracts, and games -- for specific purposes in communication networks. Traditionally, strategic mechanism design in telecommunications has relied on human expertise to craft solutions based on game theory, auction theory, and contract theory. However, the evolving landscape of telecom networks, characterized by increasing abstraction, emerging use cases, and novel value creation opportunities, calls for more adaptive and efficient approaches. We propose leveraging LLMs to automate or semi-automate the process of strategic mechanism design, from intent specification to final formulation. This paradigm shift introduces both semi-automated and fully-automated design pipelines, raising crucial questions about faithfulness to intents, incentive compatibility, algorithmic stability, and the balance between human oversight and artificial intelligence (AI) autonomy. The paper discusses potential frameworks, such as retrieval-augmented generation (RAG)-based systems, to implement LLM-driven mechanism design in communication networks contexts. We examine key challenges, including LLM limitations in capturing domain-specific constraints, ensuring strategy proofness, and integrating with evolving telecom standards. By providing an in-depth analysis of the synergies and tensions between LLMs and strategic mechanism design within the IoT ecosystem, this work aims to stimulate discussion on the future of AI-driven information economic mechanisms in telecommunications and their potential to address complex, dynamic network management scenarios.

Industrial Cyber-Physical Systems (ICPSs) are an integral component of modern manufacturing and industries. By digitizing data throughout the product life cycle, Digital Twins (DTs) in ICPSs enable a shift from current industrial infrastructures to intelligent and adaptive infrastructures. Thanks to data process capability, Generative Artificial Intelligence (GAI) can drive the construction and update of DTs to improve predictive accuracy and prepare for diverse smart manufacturing. However, mechanisms that leverage sensing Industrial Internet of Things (IIoT) devices to share data for the construction of DTs are susceptible to adverse selection problems. In this paper, we first develop a GAI-driven DT architecture for ICPSs. To address the adverse selection problem caused by information asymmetry, we propose a contract theory model and develop the sustainable diffusion-based soft actor-critic algorithm to identify the optimal feasible contract. Specifically, we leverage the dynamic structured pruning technique to reduce parameter numbers of actor networks, allowing sustainability and efficient implementation of the proposed algorithm. Finally, numerical results demonstrate the effectiveness of the proposed scheme.

Integrating low-light image enhancement techniques, in which diffusion-based AI-generated content (AIGC) models are promising, is necessary to enhance nighttime teleoperation. Remarkably, the AIGC model is computation-intensive, thus necessitating the allocation of AIGC tasks to edge servers with ample computational resources. Given the distinct cost of the AIGC model trained with varying-sized datasets and AIGC tasks possessing disparate demand, it is imperative to formulate a differential pricing strategy to optimize the utility of teleoperators and edge servers concurrently. Nonetheless, the pricing strategy formulation is under information asymmetry, i.e., the demand (e.g., the difficulty level of AIGC tasks and their distribution) of AIGC tasks is hidden information to edge servers. Additionally, manually assessing the difficulty level of AIGC tasks is tedious and unnecessary for teleoperators. To this end, we devise a framework of AIGC task allocation assisted by the Vision Language Model (VLM)-empowered contract theory, which includes two components: VLM-empowered difficulty assessment and contract theory-assisted AIGC task allocation. The first component enables automatic and accurate AIGC task difficulty assessment. The second component is capable of formulating the pricing strategy for edge servers under information asymmetry, thereby optimizing the utility of both edge servers and teleoperators. The simulation results demonstrated that our proposed framework can improve the average utility of teleoperators and edge servers by 10.88~12.43% and 1.4~2.17%, respectively. Code and data are available at https://github.com/ZiJun0819/VLM-Contract-Theory.

In this paper, we address the problem of designing incentive mechanisms by a virtual service provider (VSP) to hire sensing IoT devices to sell their sensing data to help creating and rendering the digital copy of the physical world in the Metaverse. Due to the limited bandwidth, we propose to use semantic extraction algorithms to reduce the delivered data by the sensing IoT devices. Nevertheless, mechanisms to hire sensing IoT devices to share their data with the VSP and then deliver the constructed digital twin to the Metaverse users are vulnerable to adverse selection problem. The adverse selection problem, which is caused by information asymmetry between the system entities, becomes harder to solve when the private information of the different entities are multi-dimensional. We propose a novel iterative contract design and use a new variant of multi-agent reinforcement learning (MARL) to solve the modelled multi-dimensional contract problem. To demonstrate the effectiveness of our algorithm, we conduct extensive simulations and measure several key performance metrics of the contract for the Metaverse. Our results show that our designed iterative contract is able to incentivize the participants to interact truthfully, which maximizes the profit of the VSP with minimal individual rationality (IR) and incentive compatibility (IC) violation rates. Furthermore, the proposed learning-based iterative contract framework has limited access to the private information of the participants, which is to the best of our knowledge, the first of its kind in addressing the problem of adverse selection in incentive mechanisms.

Consider the relationship between a regulator (the principal) and a pharmaceutical company (the agent). The pharmaceutical company wishes to sell a product to make a profit, and the FDA wishes to ensure that only efficacious drugs are released to the public. The efficacy of the drug is not known to the FDA, so the pharmaceutical company must run a costly trial to prove efficacy to the FDA. Critically, the statistical protocol used to establish efficacy affects the behavior of a strategic, self-interested pharmaceutical company; a lower standard of statistical evidence incentivizes the pharmaceutical company to run more trials for drugs that are less likely to be effective, since the drug may pass the trial by chance, resulting in large profits. The interaction between the statistical protocol and the incentives of the pharmaceutical company is crucial to understanding this system and designing protocols with high social utility. In this work, we discuss how the principal and agent can enter into a contract with payoffs based on statistical evidence. When there is stronger evidence for the quality of the product, the principal allows the agent to make a larger profit. We show how to design contracts that are robust to an agent's strategic actions, and derive the optimal contract in the presence of strategic behavior.