A Cost-Aware Utility-Maximizing Bidding Strategy for Auction-Based Federated Learning

Auction-based federated learning (AFL) has emerged as an efficient and fair approach to incentivize data owners (DOs) to contribute to federated model training, garnering extensive interest. However, the important problem of helping data consumers (DCs) bid for DOs in competitive AFL settings remains open. Existing work simply treats that the actual cost paid by a winning DC (i.e., the bid cost) is equal to the bid price offered by that DC itself. However, this assumption is inconsistent with the widely adopted generalized second-price (GSP) auction mechanism used in AFL, including in these existing works. Under a GSP auction, the winning DC does not pay its own proposed bid price. Instead, the bid cost for the winner is determined by the second-highest bid price among all participating DCs. To address this limitation, we propose a first-of-its-kind federated cost-aware bidding strategy (FedCA-Bidder) to help DCs maximize their utility under GSP auction-based federated learning (FL). It enables DCs to efficiently bid for DOs in competitive AFL markets, maximizing their utility and improving the resulting FL model accuracy. We first formulate the optimal bidding function under the GSP auction setting, and then demonstrate that it depends on utility estimation and market price modeling, which are interrelated. Based on this analysis, FedCA-Bidder jointly optimizes in a novel end-to-end framework, and then executes the proposed return on investment (ROI)-based method to determine the optimal bid price for each piece of the data resource. Through extensive experiments on six commonly adopted benchmark datasets, we show that FedCA-Bidder outperforms eight state-of-the-art methods, beating the best baseline by 4.39%, 4.56%, 1.33%, and 5.43% on average in terms of the total amount of data obtained, number of data samples per unit cost, total utility, and FL model accuracy, respectively.