Token Reduction Is Not Cost Reduction

arXiv cs.CL · 18 hours ago

A study of 2,848 Claude Code API runs found that reducing tokens in tool outputs does not reliably lower end-to-end billing costs for coding agents. Prompt caching accounted for approximately 87% of the reconstructed cost composition, while an intervention removing 38% of tool-output tokens actually increased paired costs by 6.8%. The findings suggest context-reduction systems should be evaluated by success-adjusted billed cost rather than token reduction metrics, as aggressive compression can corrupt critical information needed for task completion.