What Does Context Compression Cost an Agent? Interaction Costs Unrevealed by Task-Completion Metrics

Context compression is widely proposed as a way to cut the token bill of LLM coding agents, and public benchmarks report that aggressive compression preserves task-solving quality. These two facts do not imply the third one commonly assumed: that compressing file reads saves money in a real multi-turn agent. We instrument a production compression gateway (Paritok) between coding agents (Claude Code, Codex) and frontier LLMs (Claude Sonnet, GPT-5), and decompose the token bill of real sessions into three independent levers: tool-schema filtering, content compression of file reads and tool output, and history summarization. Measured in isolation under controlled A/B runs, the three save at fundamentally different rates. Tool-schema filtering removes a fixed block every turn, roughly 21K-57K tokens on a typical turn; it is linear in the turn count N and the only unambiguously and reproducibly positive lever. Content compression saves only about 2% of the cache-priced prefix per turn, but compressed reads accumulate in history and are re-sent on every later turn, so its cumulative saving grows quadratically, about 3350*N^2 tokens (measured), overtaking the fixed tool-filter saving within roughly 6 turns until the context window caps it. A non-destructive gateway lets the agent pull original bytes back on demand; each recall re-sends exactly the one segment just compressed away, so its cost is fixed and bounded rather than a multiplicative blowup, and heavy recall spends the accumulated saving back one segment at a time. Finally, a strong single-shot compression benchmark - 86.5% of SWE-bench quality retained at a 25.7% compression rate, achieved by the model this gateway deploys (Paritok-4B, reported separately) - is orthogonal to multi-turn agent cost and must not be cited as a cost-saving argument. We distill the results into an actionable recipe for where token-saving effort pays off.

As LLM agents tackle longer tasks, they increasingly compress growing histories of reasoning, actions, and tool outputs. Compression can reduce token use, but it also changes the information available for later decisions. Existing agentic harnesses bundle decisions about what to compress, when to compress, and how much to remove into fixed policies. A systematic characterization is needed to disentangle these decisions and reveal how each affects task success and execution cost. We systematically vary these decisions across three open-weight models on SWE-bench Verified and Terminal-Bench 1.0. Across nearly 35,000 agent runs, we measure task success, token use, end-to-end latency, and estimated cost. We find that fewer tokens need not mean faster or cheaper execution: on Terminal-Bench with Qwen, policies using roughly one-third as many tokens can take 20-80% longer than the uncompressed agent. Policies with similar overall success can solve different tasks, while the same policy can perform quite differently across models. Our results motivate evaluating compression by its effects on agent execution and tailoring policies to the task, model, and workload.

LLM agents accumulate interaction histories that grow linearly with task length, causing quadratic inference cost scaling and performance degradation from attention dilution. Existing context-compression methods learn what to discard offline: by contrastively optimizing guidelines, distilling compressors, or training compression policies. This incurs a substantial cost. Further, the compression policy is learned a priori and is not dynamically conditioned on the evolving test-time trajectories. In this paper we ask a complementary question: Which past interactions causally shape the agent's future decisions? We recast context compression as a causal decision preservation problem over discrete interaction units and introduce FOCUS, a training-free context compression framework that operates entirely at test time. Our method requires no offline data collection or fine-tuning, and is architecture-agnostic, attaching to any closed-API frontier model as a modular compression layer. We evaluate FOCUS on diverse agentic benchmarks including API and tool-calling, QA, web domain and multi-turn dialogue. Our method establishes new state of the art performance, cutting peak context by up to 48% and dependency by 73% while improving task success by up to 8.9 percentage points over uncompressed execution.