What Cache Hit Rate Means for RAG and Agent Workflows

Question

How does cache hit rate change agent unit cost?

Quick answer

Formula: effective_cost_per_request = base_cost_per_request * (1 - cache_hit_rate)

• Assumption: cache-hit requests avoid most generation and retrieval costs.
• Assumption: hit rate is measured on production-like traffic, not synthetic tests.
• Assumption: freshness constraints can cap achievable hit rate.

Example: at $0.020/request base cost and 40% hit rate, effective cost becomes $0.012/request.

Practical Ranges

• Low reuse products: 5-15%
• Mixed workloads: 20-40%
• FAQ-like workloads: 40-70%

How To Improve It

• Normalize semantically equivalent queries.
• Cache at retrieval + response layers.
• Use freshness windows by content type.