The informational aspect of the group-buying mechanism
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review
Author(s)
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Detail(s)
Original language | English |
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Pages (from-to) | 331-340 |
Journal / Publication | European Journal of Operational Research |
Volume | 234 |
Issue number | 1 |
Online published | 24 Oct 2013 |
Publication status | Published - 1 Apr 2014 |
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Abstract
This paper studies the group-buying mechanism from a dynamic perspective. We consider a seller that offers a product in the form of group buying (priced low but uncertain) and spot purchasing (priced high but guaranteed). In the case of group buying, the information associated with the number of participating customers is updated in the middle of the sale. Customers are assumed to be strategic with a time-dependent utility. In addition to choosing between spot purchasing and group buying, customers could choose to delay their decisions until the information update. We characterize the customer behavior within a rational expectations framework. We then consider the effect of information and demand dynamics. Our results show that whereas an improvement in information quality has a positive effect on customer surplus and the group-buying success rate, the effect of inter-temporal demand correlation is mixed. We also discuss the seller's profit maximization problem and derive the condition to be satisfied at the optimal group size. © 2013 Elsevier B.V. All rights reserved.
Research Area(s)
- E-commerce, Group buying, Information update, Rational expectations
Citation Format(s)
The informational aspect of the group-buying mechanism. / Liang, Xiaoying; Ma, Lijun; Xie, Lei et al.
In: European Journal of Operational Research, Vol. 234, No. 1, 01.04.2014, p. 331-340.
In: European Journal of Operational Research, Vol. 234, No. 1, 01.04.2014, p. 331-340.
Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review