Stochastic analysis sharpens rather than erodes the thesis: the ignition boundary acquires a predicted width, and noise punishes the reactive policy that parks the system against it.
Abstract
Large language model providers are compute constrained, and their universal response to congestion is to degrade service: route queries to smaller models, cut reasoning effort, truncate context. The industry's accounting says this saves money. We show the accounting is wrong, because it prices a query when the customer buys an answer. A degraded answer fails with some probability, and a failed answer either returns as a retry, inflating arrivals when the system is most loaded, or departs as churn, destroying lifetime value on a ledger no cost dashboard displays. We model inference allocation with three classical primitives: a newsvendor whose stockout cost is churned lifetime value, a geometric retry multiplier in which the recycled product is dissatisfaction, and a two-regime transient queue whose arrival rate is made endogenous by retries. Statically, there is a nonempty, measurable regime in which a cheaper model saves energy per satisfied answer while consuming strictly more capacity per satisfied answer, so the discount inverts exactly when capacity binds. Dynamically, a reactive throttle fired during a surge can cross an ignition threshold beyond which it manufactures more traffic than it sheds, and a release rule set below the degraded equilibrium converts a transient surge into a permanent degraded regime. With heterogeneous customers, throttling is a transportation problem in retry-inflated load whose optimal policy rations intelligence by critical ratio, class by class, and whose dual, the shadow price of intelligence, prices a marginal query by class and by hour; closed-form trajectories make it computable in milliseconds. Stochastic analysis sharpens rather than erodes the thesis: the ignition boundary acquires a predicted width, and noise punishes the reactive policy that parks the system against it. Under congestion, throttling is not a cost lever but a demand lever.
Many algorithms spend an internal resource before returning a decision and are evaluated only by the quality of that terminal output. We formalize such procedures as terminal computation-allocation problems: costly computations produce observations, update beliefs about a latent environment, and matter only through terminal decision loss. Bellman equations characterize optimal allocation under fixed budgets, priced computation, and exact certification. We then relate value of computation (VOC) to information. Mutual information equals myopic VOC under log loss, whereas under simple regret VOC is a knowledge-gradient quantity; moreover, information gain can rank computations arbitrarily poorly, although it gives a one-sided upper bound on VOC. Bandit pulls, tree simulations, and node expansions illustrate the same model under different computation topologies. Finally, under an explicit frontier-resolution and heuristic-error model, maximizing approximate VOC recovers weighted A*, with A* and greedy best-first search as limiting cases. The theory identifies a shared decision problem without asserting that one acquisition rule is universally optimal.
Large language models increasingly support scientific and algorithmic discovery through inference-time search over evaluated candidates. Existing adaptive discovery controllers assign credit based only on score progress, even though prompt length, retries, and guidance calls cause search actions to incur different token costs. We prove that cost-blind credit can forfeit all but a vanishing fraction of attainable quality as frontiers multiply and costs diverge. Under a fixed search-side token budget, the controller must decide which frontier is improving and whether its gain justifies the realized cost before the budget is exhausted. We introduce \textbf{CostAda}, a cost-calibrated adaptive controller built around \emph{cost-calibrated frontier utility}. The utility values frontier progress relative to realized action cost and conditions that credit on the remaining budget. CostAda uses this signal to control local exploration intensity, frontier allocation, and budgeted tactic intervention. Cost and remaining budget therefore shape the search rather than serving only as accounting variables or a stopping rule. CostAda reaches the strongest baseline's full-budget quality with at most half the budget on twelve of sixteen benchmark--backbone pairs while achieving the strongest mean final quality on all eight benchmarks under GLM-5 and GPT-5.4.
Yansen Zhang, Yilu Liu, Tianyu Liu et al.· 0 citations
Heterogeneous AI systems composed of multiple models, architectures, harnesses, or inference-time settings can improve quality and efficiency by routing queries to the specialist who can answer most effectively at the lowest cost. Routing requires estimating each specialist's expected return, but this value estimation has a cost. Cheap estimators (e.g., embedding-based predictors) are fast but noisy, while accurate estimators (e.g., fine-tuned models with access to retrieval results or partial reasoning traces) are expensive. We formalize this tradeoff as an instance of Pandora's Box, the classical problem of optimal search with costly inspection. Under a Gaussian signal model, the resulting policies have closed-form value-of-information expressions that determine, for each specialist and input, whether refining the value estimate is worth its cost. We call the centralized policy Pandora's Router. We extend this to a decentralized setting, Pandora's Bidder, where specialists independently decide whether to invest in self-assessment before accepting an offered price to claim a query. Experiments across three domains---a standard multi-LLM benchmark, retrieval-augmented specialists, and LLMs with variable inference-time reasoning---show that Pandora's Router matches the routing quality of exhaustive estimation, while querying the expensive estimator far less often. In the decentralized setting, value-of-information reasoning improves allocative efficiency when competing estimates are accurate; when competing estimates are noisy, however, it can increase the strategic specialist's utility at the expense of others.
Adam Fisch, Shubhendu Trivedi, Fantine Huot et al.· 1 citation
Standard economics assumes the consumer as a flawless calculator who always buys the best basket it can afford. This paper models the shopper instead as a limited information channel: it compresses its world to the detail its attention affords, so its choice is a probability distribution, not a single basket. The textbook consumer returns exactly as the unlimited-attention limit, while at the zero-attention end the shopper falls back on pure habit. The central result is about how this shopper's demand responds to price changes. That pattern of responses is just a rescaling of how the shopper's own choices vary and move together, so it comes out symmetric. And provided the budget really binds, because the shopper wants more than it can afford, raising a good's own price lowers demand for it once buying power is held fixed. So the downward pull comes from the budget and from compression, not from rationality. The framework also covers an artificial agent running a limited-capacity policy. A worked two-good quadratic consumer carries every quantity in closed form.
Routing decisions between a cheap heuristic and an expensive large language model (LLM) are typically framed as a difficulty problem: send the hard cases to the expensive path. We argue this framing is incomplete because difficulty and business value are distinct axes - a difficult cheap item and a difficult costly item do not have the same cost of error. We present Value Router, a fully synthetic simulation of a retail merchandising pipeline that routes items using only estimated difficulty and estimated value, never ground truth. The study has three stages. First, a value-weighted threshold router is compared with a difficulty-only and a random baseline on a synthetic catalog with an inverse correlation between category volume and value. Value-weighting matches the difficulty-only baseline's recall of true high-value items (60%) while achieving substantially higher precision (98.3% vs. 94.3%). Second, a decision logger and monitor expose a failure mode hidden by aggregate metrics showing that the aggregate result is driven almost entirely by between-category differences rather than per-item discrimination. Third, a simulated Black Friday demand surge (2.5 volume with a shift toward higher-value categories) compares a static router, a seasonally tuned router, and two slow-path budget policies. All results are from a controlled synthetic simulation with experimenter-defined ground truth and illustrate design principles for cost-aware routing systems rather than validated real-world claims.
We study a large language model (LLM) service in which a provider chooses a per-token price and a default reasoning-token allocation, while a user may accept the default, customize the allocation, or exit. Larger allocations can improve accuracy but increase token cost and latency. We model this interaction as a Stackelberg game and derive the user's unique optimal customized allocation in closed form. For any price, the acceptable defaults form either an empty set or a compact interval. We characterize the provider's optimal default through a three-regime rule, reduce equilibrium computation to a one-dimensional price optimization, and prove the existence of the equilibrium. We further show that defaults affect the implemented reasoning allocation only when users value the convenience of avoiding customization; otherwise, every service-providing outcome implements the user's optimal customized allocation. Experiments with two compact open-weight reasoning models on five mathematics and science benchmarks support the accuracy-token model and show how model and task characteristics determine equilibrium prices, defaults, and reasoning allocations.
Ahmet Bugra Gundogan, Yigit Turkmen, Melih Bastopcu· 0 citations
