pricing strategy teams

Abstract: Do AI models designed for fast, structured decisions exhibit the cognitive and social biases observed in human judgment? We evaluate Jev, a model described as a System One decision-maker, using 41,500 responses across cognitive reflection tasks, five classical cognitive-bias paradigms, and a pricing experiment testing ethnic and gender bias. At the level of selected answers, the results are largely encouraging. We confirm previous findings that Jev performs extremely well on cognitive reflection problems. We also observe that it generally avoids the characteristic choice patterns associated with several well-documented human biases, and exhibits only small differences among demographic groups in the tested pricing scenario. However, this apparent robustness conceals important vulnerabilities. Its judgments are sensitive to irrelevant numerical information and the ordering of response options. Moreover, several cognitive-bias manipulations substantially affect returned probabilities even when selected answers remain unchanged. Most strikingly, Jev answers a well-known probability problem correctly in every response but violates the same underlying probability rule in every response to an adapted version. We investigate this discrepancy using 15,000 additional responses across 30 conjunction tasks. Jev violates the rule in 54\% of responses, with accuracy varying dramatically across formulations and answer orders. These findings suggest that evaluating decision models solely on familiar benchmarks and selected answers may substantially overstate their reliability in practical applications. They also identify vulnerabilities for developers to address and practical considerations for users integrating such models into automated decision-making systems.

Abstract: We study online profit maximization in multilateral trade, a setting that generalizes both dynamic pricing and bilateral trade. At each round, an intermediary posts prices to buyers and offers payments to sellers; trade occurs only if every agent accepts. We consider valuations drawn from an unknown joint distribution, allowing arbitrary correlation across agents, under the assumption that each agent's marginal valuation distribution has unknown support of size at most $K$. For constant dimension $d$, we design an algorithm with regret $\widetilde O(\sqrt{K^dT})$. This extends optimal support-dependent guarantees for one-dimensional dynamic pricing to the multidimensional setting of multilateral trade. At the core of our approach is a normalized zooming procedure that adapts to the local probability of trade, avoiding the excessive refinement of nearly flat regions that can arise with standard zooming.

Abstract: We study how much revenue a seller can lose by restricting attention to selling separately or grand bundling, in the setting of a single additive buyer with independent item values. Although revenue-optimal mechanisms can require lotteries and infinite menus, Babaioff, Immorlica, Lucier, and Weinberg showed that the better of these two simple formats always achieves a constant fraction of optimal revenue. We prove that $\mathrm{OPT} \le 3.52 \max\{\mathrm{SREV}, \mathrm{BREV}\}$, where $\mathrm{SREV}$ and $\mathrm{BREV}$ are the optimal revenues from selling separately and grand bundling, respectively. This improves the previous best-known approximation factor of $5.2$ due to Ma and Simchi-Levi and narrows the gap to the known lower bound of $2$.