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arXiv · 2608.07304

The Token Efficiency Index: A Peer-Benchmarked Composite Indicator for AI Token Efficiency

Caden Wong·Vikram Das·Himanshu Dhami
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Abstract

As artificial intelligence (AI) adoption accelerates across tech giants, AI-native startups, and non-technical organizations alike, a deceptively simple question remains hard to answer: is that spending efficient? AI consumption is priced by tokens, and costs vary by token type (input, output, reasoning) and model type, with usage ranging from a few hundred tokens for simple queries to over a million for multi-step agentic tasks. This variance makes cost comparison, both within and across organizations, difficult without a standardized framework. We introduce the Token Efficiency Index (TEI), a peer-benchmarked composite indicator that condenses token spend efficiency into a single 0-100 score. The TEI ingests an organization's AI usage data, independent of the underlying provider, and computes three direction-aware metrics: cache hit rate, cache amortization ratio, and premium model share. These are normalized to a common scale and aggregated via an equal weights composite and a Benefit-of-the-Doubt (BoD) Data Envelopment Analysis (DEA) model, with a robust order-m extension for sparse data. The result is a headline score, a peer percentile, and frontier-gap recommendations with estimated savings. Grounded in established methods from composite indicator and DEA literature, the TEI offers a transparent, interpretable approach to benchmarking AI token efficiency and identifying opportunities to optimize AI spend.

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Caden Wong, Vikram Das, Himanshu Dhami. 2026-08-07. The Token Efficiency Index: A Peer-Benchmarked Composite Indicator for AI Token Efficiency. https://arxiv.org/abs/2608.07304

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