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Participatory sensing has emerged as a novel paradigm for data collection and collective knowledge formation about a state or condition of interest, sometimes linked to a geographic area. In this paper, we address the problem of incentive mechanism design for data contributors for participatory sensing applications. The service provider receives service queries in an area from service requesters and initiates an auction for user participation. Upon request, each user reports its perceived cost per unit of amount of participation, which essentially maps to a requested amount of compensation for participation. The participation cost quantifies the dissatisfaction caused to user due to participation. This cost is considered to be private information for each device, as it strongly depends on various factors inherent to it, such as the energy cost for sensing, data processing and transmission to the closest point of wireless access, the residual battery level, the number of concurrent jobs at the device processor, the required bandwidth to transmit data and the related charges of the mobile network operator, or even the user discomfort due to manual effort to submit data. Hence, participants have strong motive to misreport their cost, i.e. declare a higher cost that the actual one, so as to obtain higher payment.We seek a mechanism for user participation level determination and payment allocation which is most viable for the provider, that is, it minimizes the total cost of compensating participants, while delivering a certain quality of experience to service requesters. We cast the problem in the context of optimal reverse auction design, and we show how the different quality of submitted information by participants can be tracked by the service provider and used in the participation level and payment selection procedures. We derive a mechanism that optimally solves the problem above, and at the same time it is individually rational (i.e., it motivates users to participate) and incentive-compatible (i.e. it motivates truthful cost reporting by participants). Finally, a representative participatory sensing case study involving parameter estimation is presented, which exemplifies the incentive mechanism above.

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