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Group Coupons: Interpersonal Bundling on the Internet

Yongmin Chen () and Tianle Zhang ()

No 12-09, Working Papers from NET Institute

Abstract: Sellers sometimes offer goods for sale under both a regular price and a discount for group purchase if the consumer group reaches some minimum size. This selling practice, which we term interpersonal bundling, has been popularized on the Internet by companies such as Groupon. We explain why interpersonal bundling is a profitable strategy in the presence of demand uncertainty, and how it may further boost profits by stimulating product information dissemination. Other reasons for its profitability are also discussed. We provide sufficient conditions for interpersonal bundling to dominate separate selling, and identify factors that determine the size of its profit advantage.

Keywords: Interpersonal Bundling; Group Coupon; Group Discount; Demand Uncertainty (search for similar items in EconPapers)
JEL-codes: D4 L1 M3 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2012-09
New Economics Papers: this item is included in nep-com, nep-ict, nep-ind and nep-mkt
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