The Price of Intelligence: A Quality-Adjusted Price Index for AI Services
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Abstract (arXiv)
Posted prices for AI inference have fallen steadily since 2024, yet the measured speed of that fall depends almost entirely on the method of measurement. This paper constructs quality-adjusted price indices for the AI inference market from public data. The panel assembles 21,024 posted-price observations across 3,208 models and 86 providers and joins them to 4,605 benchmark scores through a latent quality index estimated from benchmark response patterns, so the quality ladder of the hedonic tradition is built here from evaluations in place of product characteristics. Measured by the matched-model methods that statistical agencies apply to software, inference prices fell at 0.10 log points a year. The quality-adjusted index fell at 0.73, so 87% of the decline is invisible to current methods, with direct consequences for measured competition, concentration and productivity in this market. Counted per completed task, moreover, the buyer's price stopped falling. Reasoning models raised token consumption faster than token prices fell, and the seller's and buyer's prices accordingly diverged. A pre-registered validity audit disciplines the quality measure and yields the sharpest result. Excluding contamination-flagged benchmarks leaves model rankings intact at 0.998 yet moves the index by 0.49 log points a year, so the leaderboard-stability arguments standard in AI evaluation offer no defence of economic statistics built on benchmarks. Prices, quality and the audit are fully reproducible from public sources at zero cost.
Key facts. No citing papers in the map yet (data through 14 Oct 2026). Builds on 7 of its 34 references that are in the map. First posted on arXiv 30 Aug 2026.
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7 of 34 references.
References · 7
- 2023NLP Evaluation in trouble: On the Need to Measure LLM Data Contamination for each Benchmarkcited by 348
- 2024tinyBenchmarks: evaluating LLMs with fewer examplescited by 310
- 2023Proving Test Set Contamination in Black Box Language Modelscited by 230
- 2021Comparing Test Sets with Item Response Theorycited by 57
- 2025A Rosetta Stone for AI Benchmarkscited by 36
- 2023Hedonic Prices and Quality Adjusted Price Indices Powered by AIcited by 3
- 2025The Price of Progress: Price Performance and the Future of AIcited by 3
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- 2026AI Scientists Are Only as Good as Their Evidence: A Stratified Ablation of Proprietary Data and Reasoning Skills in Drug-Asset Valuation
- 2026Memory Scarcity, Open Models, and the Restructuring of the AI Industry, 2026-2030 -- A quantitative scenario analysis of inference economics, training-cost divergence, and infrastructure solvency
- 2026The Shadow Price of Intelligence: Quality Degradation in LLM Inference as a Supply Chain Problem
- 2025Cost-of-Pass: An Economic Framework for Evaluating Language Models