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Demand for LLMs: Descriptive Evidence on Substitution, Market Expansion, and Multihoming

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  • Andrey Fradkin

Abstract

This paper documents three stylized facts about the demand for Large Language Models (LLMs) using data from OpenRouter, a prominent LLM marketplace. First, new models experience rapid initial adoption that stabilizes within weeks. Second, model releases differ substantially in whether they primarily attract new users or substitute demand from competing models. Third, multihoming, using multiple models simultaneously, is common among apps. These findings suggest significant horizontal and vertical differentiation in the LLM market, implying opportunities for providers to maintain demand and pricing power despite rapid technological advances.

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  • Andrey Fradkin, 2025. "Demand for LLMs: Descriptive Evidence on Substitution, Market Expansion, and Multihoming," Papers 2504.15440, arXiv.org.
    • Handle: RePEc:arx:papers:2504.15440
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    1. Christopher Conlon & Julie Holland Mortimer, 2021. "Empirical properties of diversion ratios," RAND Journal of Economics, RAND Corporation, vol. 52(4), pages 693-726, December.
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