Between November 2022 and October 2024, AI token prices collapsed by 280x. This isn’t incremental improvement—it’s the kind of deflationary shock that reshapes entire industries.
The Token Economics framework reveals tokens as the new currency of AI. One token equals approximately 0.75 words (or ~4 characters). “The quick brown fox jumps” costs you 5 tokens. Like HTTP requests enabled web commerce, tokens enable AI commerce—they’re how AI is priced, measured, and monetized.
But here’s the critical asymmetry most people miss: output tokens cost 4-10x more than input tokens. Why? Input processing can happen in parallel batches, but output generation must proceed sequentially, token by token. This explains the pricingstructure across every major AI provider.
The December 2025 pricing landscape shows remarkable variance:
GPT-4 Nano: $0.03 input / $0.11 output (per million tokens)
Gemini Flash-Lite: $0.075 / $0.30
GPT-4 Mini: $0.25 / $2.00
DeepSeek R1: $0.55 / $2.19
GPT-4: $1.25 / $10.00
This 40x spread between cheapest and most expensive represents a market still finding its equilibrium. DeepSeek’s aggressive pricing from China suggests commoditization is accelerating faster than incumbents expected.
For business strategists, the implication is clear: AI capabilities that seemed economically impossible two years ago are now viable. The 280x collapse continues to unlock new use cases monthly.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
