Document de travail

The Economics of Large Language Models: Token Allocation, Fine-Tuning, and Optimal Pricing

Dirk Bergemann, Alessandro Bonatti et Alex Smolin

Résumé

We develop an economic framework to analyze the optimal pricing and product design of Large Language Models (LLM). Our framework captures several key features of LLMs: variable operational costs of processing input and output tokens; the ability to customize models through fine-tuning; and high-dimensional user heterogeneity in terms of task requirements and error sensitivity. In our model, a monopolistic seller offers multiple versions of LLMs through a menu of products. The optimal pricing structure depends on whether token allocation across tasks is contractible and whether users face scale constraints. Users with similar aggregate value-scale characteristics choose similar levels of fine-tuning and token consumption. The optimal mechanism can be implemented through menus of two-part tariffs, with higher markups for more intensive users. Our results rationalize observed industry practices such as tiered pricing based on model customization and usage levels.

Mots-clés

Large Language Models; Optimal Pricing; Menu Pricing; Fine-Tuning;

Codes JEL

  • D47: Market Design
  • D82: Asymmetric and Private Information • Mechanism Design
  • D83: Search • Learning • Information and Knowledge • Communication • Belief

Référence

Dirk Bergemann, Alessandro Bonatti et Alex Smolin, « The Economics of Large Language Models: Token Allocation, Fine-Tuning, and Optimal Pricing », TSE Working Paper, n° 25-1670, octobre 2025.

Voir aussi

Publié dans

TSE Working Paper, n° 25-1670, octobre 2025