AI Tokenomics: The Economics of Tokens, Computation, and Pricing in Foundation Models

The paper introduces a framework for AI tokenomics, analyzing the generation, consumption, pricing, and optimization of tokens in foundation models. It connects token-level costs to broader workflow production functions and highlights the distinction between token expenditure and economic value, which is influenced by factors such as marginal productivity and downstream effects. This framework is crucial for practitioners as it informs resource allocation and market design in AI systems, while also identifying key research areas like hidden-token measurement and dynamic allocation.