Elastic Expectations | August 18, 2026 | Citadel Securities
Author: Frank Flight
Publication Date: August 18, 2026
Executive Summary
The article addresses a fundamental question facing the AI economy: Does making intelligence cheaper expand total demand rapidly enough to support the massive valuation expectations embedded in compute infrastructure, models, and application layers?
Citadel Securities concludes that recent market data provides tentative evidence of high price elasticity of demand (Jevons Paradox). Decreasing inference costs and falling token prices are driving a massive expansion in consumption volume rather than destroying aggregate economic value across the AI ecosystem.
Key Takeaways & Data Points
1. Jevons Paradox in Action (Token vs. Compute Divergence)
References
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