The informational aspect of the group-buying mechanism

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journal

25 Scopus Citations
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Detail(s)

Original languageEnglish
Pages (from-to)331-340
Journal / PublicationEuropean Journal of Operational Research
Volume234
Issue number1
Online published24 Oct 2013
Publication statusPublished - 1 Apr 2014

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; Yan, Houmin.

In: European Journal of Operational Research, Vol. 234, No. 1, 01.04.2014, p. 331-340.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journal