Context Budget Allocation Strategies (EXPLAINED)
Hard context engineering trade-offs: prioritization tiers, dynamic reallocation, and what to drop first under pressure.
TL;DR — Quick Answer
Reserve non-negotiable space for system instructions and safety, cap RAG with reranking, summarize older chat, and truncate tool logs aggressively while preserving errors. Use dynamic allocation: retrieval expands when user asks factual questions; history shrinks during tool-heavy agent phases. Measure task success vs allocation knobs.
The Interview Question
You have a fixed context window. How do you allocate budget across system prompt, RAG chunks, tools, and chat history?
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