How Prompt Inflation Erodes LLM Economics

Short summary

Prompts often grow over time as teams add conversation history, RAG context, and formatting rules, inflating token counts and costs without proportional user value. Track costs per user and per feature to catch context window bloat. Implement context truncation strategies and use monitoring tools to catch cost inflation before it erodes margins.

• •Prompt size commonly grows from 500→8k tokens as features accumulate (history, RAG, formatting)
• •Cost doesn't scale linearly with prompt size, but billing does—risking margin collapse
• •Solution: attribute costs to users and features; truncate long context windows

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