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Model Price Drop Stress Test

Frontier model prices fall 50% — does your margin balloon, or does competition compress your prices to match?

Your numbers

Start from an example

$
$
Gross margin today

Result

Gross margin after a 50% price drop (savings kept)
67.5%
Margin at 10% drop
61.5%
Margin at 30% drop
64.5%
Revenue if passed through (50%)
$81,250
Gross profit if passed through (50%)
$48,750

Margin under price-drop scenarios

Gross margin if you keep the savings at each LLM price drop.

10% drop — keep savings
61.5%
30% drop — keep savings
64.5%
50% drop — keep savings
67.5%

General business information, not legal, tax or financial advice. The result comes only from your inputs and the published method. How we check our numbers.

How to use it

  1. Enter your monthly revenue, your monthly AI cost, and your gross margin percentage today. The tool stress-tests fixed 10%, 30%, and 50% drops in LLM pricing, which matters because frontier model prices have fallen sharply over the past year, and the question for any AI business is not whether prices will drop but what happens to your margins when they do.
  2. Read the gross margin if you keep the savings at a 50% drop (the headline), the same margin at 10% and 30% drops, and for the 50% case what happens if competitors pass the savings through as lower prices: the revenue and gross profit dollars you would be left with. Under proportional pass-through your margin percentage stays where it is while the dollars shrink. The keep-savings view shows your margin upside; the pass-through view shows the competitive scenario where the whole market reprices.
  3. Use the two views to think through your strategic choice before competitors force it. Keeping the savings widens margin but invites a competitor to undercut you on price; passing them through defends share but compresses margin. The tool quantifies both outcomes so the decision is made on numbers rather than nerve, and the most-likely-margin output anchors on the 50% scenario.
  4. Gauge your sensitivity from the spread between scenarios. If a 50% price drop barely moves your margin, AI cost is a small share of your economics and price changes are not a strategic concern; if the same drop swings your margin by many points, your business is highly leveraged to model pricing and you should plan deliberately for how you will respond when it falls.
  5. Re-run whenever a vendor announces a price cut or you renegotiate, and use it as the upside companion to the runway with AI cost shock tool, which models the downside of a price hike. Together they bracket your exposure to vendor pricing in both directions, which is the realistic way to plan around a cost line you do not control.
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Use it from code

The same calculation as a JavaScript module you can import. It runs where you import it, with no request, key or rate limit.

import { compute } from "https://aibizhub.io/engines/model-price-drop-stress-test.js";

Input and output contract, TypeScript types and the guide for agents.