Demystifying the Privacy-Utility Trade-off in LLM Interactions

arXiv cs.AISeptember 12, 2026en

arXiv:2609.10992v1 Announce Type: new Abstract: The integration of Large Language Models into daily tasks relies on context-rich instructions, inevitably exposing sensitive user information. Current privacy-preserving methods typically employ context-agnostic static rules, causing severe utility degradation. However, the specific mechanisms governing how sanitization impacts downstream performance remain largely underexplored. To address this, we conduct a systematic analysis to deconstruct the privacy-utility trade-off, uncovering three underlying mechanisms: (1) Context-Dependent Utility, which first establishes when to sanitize by revealing that data value shifts from critical constraints

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