Menu Pricing of Large Language Models

Dirk Bergemann, Alessandro Bonatti and Alex Smolin

No 21275, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We develop a framework for the optimal pricing and product design of LLMs in which a provider sells menus of token budgets to users who differ in their valuations across a continuum of tasks. Under a homogeneous production technology, we show that users' high-dimensional type profiles are summarized by a scalar index, reducing the seller's problem to one-dimensional screening. The optimal mechanism takes the form of committed-spend contracts: buyers pay for a budget that they allocate across token classes priced at marginal cost. We extend the analysis to environments with multiple differentiated models and to competition between a proprietary leader and an open-source fringe, showing that competitive pressure reshapes both the intensive and extensive margins of compute provision. Each element of our theory (token-budget menus, maximum- and minimum-spend plans, multi-model versioning, and linear API pricing) has a direct counterpart in the observed pricing practices of providers such as Anthropic, OpenAI, and GitHub.

Keywords: Large; Language; Models (search for similar items in EconPapers)
JEL-codes: D47 D82 D83 (search for similar items in EconPapers)
Date: 2026-03
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP21275 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:21275

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP21275

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().