{"ID":2894698,"CreatedAt":"2026-06-01T04:54:23.091178241Z","UpdatedAt":"2026-06-01T04:54:23.091178241Z","DeletedAt":null,"paper_url":"https://arxiv.org/abs/2507.14193","arxiv_id":"2507.14193","title":"Modeling the Economic Impacts of AI Openness Regulation","abstract":"Regulatory frameworks, such as the EU AI Act, encourage openness of general-purpose AI models by offering legal exemptions for \"open-source\" models. Despite this legislative attention on openness, the definition of open-source foundation models remains ambiguous. This paper models the strategic interactions among the creator of a general-purpose model (the generalist) and the entity that fine-tunes the general-purpose model to a specialized domain or task (the specialist), in response to regulatory requirements on model openness. We present a stylized model of the regulator's choice of an open-source definition to evaluate which AI openness standards will establish appropriate economic incentives for developers. Our results characterize market equilibria -- specifically, upstream model release decisions and downstream fine-tuning efforts -- under various openness regulations and present a range of effective regulatory penalties and open-source thresholds. Overall, we find the model's baseline performance determines when increasing the regulatory penalty vs. the open-source threshold will significantly alter the generalist's release strategy. Our model provides a theoretical foundation for AI governance decisions around openness and enables evaluation and refinement of practical open-source policies.","short_abstract":"Regulatory frameworks, such as the EU AI Act, encourage openness of general-purpose AI models by offering legal exemptions for \"open-source\" models. Despite this legislative attention on openness, the definition of open-source foundation models remains ambiguous. This paper models the strategic interactions among the c...","url_abs":"https://arxiv.org/abs/2507.14193","url_pdf":"https://arxiv.org/pdf/2507.14193v2","authors":"[\"Tori Qiu\",\"Benjamin Laufer\",\"Jon Kleinberg\",\"Hoda Heidari\"]","published":"2025-07-14T07:08:31Z","proceeding":"cs.GT","tasks":"[\"cs.GT\",\"cs.AI\",\"cs.CY\"]","methods":"[]","has_code":false}