The Power of Simple Menus in Robust Selling Mechanisms

Shixin Wang ()
Additional contact information
Shixin Wang: Department of Decisions, Operations and Technology, Chinese University of Hong Kong Business School, Chinese University of Hong Kong, Shatin, New Territories, Hong Kong

Management Science, 2025, vol. 71, issue 6, 5268-5287

Abstract: We study a robust selling problem where a seller attempts to sell one item to a buyer but is uncertain about the buyer’s valuation distribution. The existing literature shows that robust screening provides a stronger theoretical guarantee than robust deterministic pricing but at the expense of implementation complexity as it requires a menu of infinite options. Our research aims to find simple mechanisms to hedge against market ambiguity effectively. We develop a general framework for robust selling mechanisms with a finite menu (or randomization across finite prices). We propose a tractable reformulation that addresses various ambiguity sets of the buyer’s valuation distribution, including support, mean, and quantile ambiguity sets. We derive optimal selling mechanisms and corresponding performance ratios for different menu sizes, which show that even a modest menu size can deliver benefits similar to those achieved by the optimal robust mechanism with infinite options, establishing a favorable trade-off between theoretical performance and implementation simplicity. Remarkably, a menu size of merely two can significantly enhance the performance ratio compared with deterministic pricing.

Keywords: robust pricing; robust screening; minimax regret; competitive ratio; simple menu (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2023.03738 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:71:y:2025:i:6:p:5268-5287

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().