The Implications of Group-Buying as a Channel Option Under Capacity Constraint

Qijun Qiu, Ying-Ju Chen () and Benjamin P.-C. Yen ()
Additional contact information
Qijun Qiu: Department of Decision Sciences, School of Business, Macau University of Science and Technology, Avenida Wai Long, Taipa, Macau
Ying-Ju Chen: Department of ISOM, School of Business and Management, Department of IELM, School of Engineering, Hong Kong University of Science and Technology, Clear Water Bay, Kowloon, Hong Kong
Benjamin P.-C. Yen: Faculty of Business and Economics, The University of Hong Kong, Pokfulam Road, Hong Kong

Asia-Pacific Journal of Operational Research (APJOR), 2018, vol. 35, issue 04, 1-32

Abstract: We investigate a setting in which two retailers sell substitutable products to a market. With the rise of group-buying (GB) consumers, each retailer has the option to open a GB channel to cater to their demand and complement its regular sales. We find that the retailers will forfeit this option to only sell in regular channels when they have scarce capacities, but both open GB channels when they have ample capacities. The situation is more intricate when their capacity levels are intermediate, in which case the equilibrium channel structure is influenced by the substitution effect and the consumers’ channel preference. A higher capacity level does not necessarily incentivize a retailer to open group-buying channel. When given the authority, the retailers under strong competition pressure prefer to commit to regular prices over tailoring regular prices to fit the channel structure. Circumstances exist in which both retailers strategically open GB channels but keep them inactive by inducing all consumers to only buy from regular channels. Moreover, the sequence whereby the retailers follow to set regular prices and decide on GB channels is inconsequential on market equilibrium. Our main findings are robust with respect to model assumptions.

Keywords: Group-buying; pricing; multi-channel management; retail operations; competitive strategy (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0217595918500227
Access to full text is restricted to subscribers

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:wsi:apjorx:v:35:y:2018:i:04:n:s0217595918500227

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0217595918500227

Access Statistics for this article

Asia-Pacific Journal of Operational Research (APJOR) is currently edited by Gongyun Zhao

More articles in Asia-Pacific Journal of Operational Research (APJOR) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().