From Fairness to Truthfulness: Rethinking Data Valuation Design

Abstract: As LLMs increasingly rely on external data sources, fairly compensating data contributors has become a central concern. In this paper, we revisit the design of data markets through a game-theoretic lens, where data owners face private, heterogeneous costs for data sharing. We show that commonly used valuation methods--such as Leave-One-Out and Data Shapley--fail to ensure truthful reporting of these costs, leading to inefficient market outcomes. To address this, we adapt well-established payment rules from mechanism design, namely Myerson and Vickrey-Clarke-Groves (VCG), to the data market setting. We demonstrate that the Myerson payment is the minimal truthful payment mechanism, optimal from the buyer's perspective, and that VCG and Myerson payments coincide in unconstrained allocation settings. Our findings highlight the importance of incorporating incentive compatibility into data valuation, paving the way for more robust and efficient data markets.