Introduction
We already covered picking the right model tier for the task and caching a large shared prefix in https://pg-blogs.netlify.app/posts/11-building-reliable-llm-apps-in-java/. Those two lines were the tip of a bigger discipline: LLM cost is not a fixed line item, it's an engineering variable — one you can measure and shrink with the same rigor you'd apply to database query time or container memory.
This post goes deeper: how input/output pricing actually works, the exact cache_control shape and how to prove a cache hit rather than assume one, the Batches API for work that isn't latency-sensitive, and model routing — using a cheap model to triage, escalating only the hard cases to a stronger one. The honest framing throughout: measure before you optimize. Every technique here has a cost of its own; applied to the wrong workload, "optimization" makes things slower or more expensive.
Token Economics: Why the Prefix Is the Bill
Anthropic (like every hosted LLM provider) prices input and output tokens separately, and output is always pricier — the model has to generate output autoregressively, one token informed by all the ones before it, while input can be processed in parallel. Representative pricing from the current model catalog:
