Simultaneous vs. Sequential Group-Buying Mechanisms

Ming Hu (), Mengze Shi () and Jiahua Wu ()
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Ming Hu: Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada
Mengze Shi: Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada
Jiahua Wu: Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada

Management Science, 2013, vol. 59, issue 12, 2805-2822

Abstract: This paper studies the design of group-buying mechanisms in a two-period game where cohorts of consumers arrive at a deal and make sign-up decisions sequentially. A firm can adopt either a sequential mechanism where the firm discloses to second-period arrivals the number of sign-ups accumulated in the first period, or a simultaneous mechanism where the firm does not post the number of first-period sign-ups and hence each cohort of consumers faces uncertainty about another cohort's size and valuations when making sign-up decisions. Our analysis shows that, compared with the simultaneous mechanism, the sequential mechanism leads to higher deal success rates and larger expected consumer surpluses. This result holds for a multiperiod extension and when the firm offers a price discount schedule with multiple breakpoints. Finally, when the firm can manage the sequence of arrivals, it should inform the smaller cohort of consumers first. This paper was accepted by J. Miguel Villas-Boas, marketing.

Keywords: promotion; group buying; coordination game (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:59:y:2013:i:12:p:2805-2822

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