A group-buying mechanism for considering strategic consumer behavior

Chenxu Ke, Bo Yan () and Ruofan Xu
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Chenxu Ke: South China University of Technology
Bo Yan: South China University of Technology
Ruofan Xu: South China University of Technology

Electronic Commerce Research, 2017, vol. 17, issue 4, No 7, 752 pages

Abstract: Abstract This study investigates a group-buying mechanism that considers strategic consumer behavior. In a market that consists of three types of consumers, the seller offers a product via two channels—spot purchasing and group buying—and maximizes his/her profit by setting the optimal group-buying threshold (G). Strategic consumers then choose one channel and enroll in the group based on the group-buying success rate and utility. Results show that consumer surplus decreases with increasing G and that two equilibria occur between the seller and strategic consumers. The behavior of the strategic consumers influences the group-buying success rate and the seller’s profit. We also discuss the optimization of G and the profit of the seller, and investigate the effects of the model parameters and demand volume on the optimal profit and optimal group-buying threshold G. When the retail inconvenience cost and risk aversion coefficient increase, the optimal profit decreases and the optimal G increases. However, when the demand of spot-purchasing consumers increases, the optimal profit increases and the optimal G decreases.

Keywords: Strategic consumer; Group buying; E-commerce; Equilibrium theory (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s10660-016-9232-9

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