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A group-buying mechanism for considering strategic consumer behavior

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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.

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Notes

  1. Report of China group-buying industry statistics in 2015, July 27, 2015. http://zixun.tuan800.com/a/tuangoushujubaogao/20150727/50585.html.

  2. Investopedia, http://www.investopedia.com/terms/c/consumer_surplus.asp.

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Acknowledgments

This work was supported by the Program (71471066) and Major International (Regional) Joint Research Project (71420107024) of the Natural Science Foundation of China, the Guangdong Soft Science Research Project (2013B070206013, 2015A070704005), the Guangdong Natural Science Foundation (2016A030313485), the Guangdong “12thFive-Year” Philosophy and Social Sciences Planning Project (GD15CGL15), the Guangdong Science and Technology Planning Project (2013B040500007, 2013B040200057), and the Fundamental Research Funds for the Central Universities (2015XZD14, 2015KXKYJ02).

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Authors and Affiliations

  1. School of Economics and Commerce, South China University of Technology, Guangzhou, 510006, China

    Chenxu Ke, Bo Yan & Ruofan Xu

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  1. Chenxu Ke
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  2. Bo Yan
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  3. Ruofan Xu
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Corresponding author

Correspondence to Bo Yan.

Appendix

Appendix

See Tables 3, 4.

Table 4 Profit of the retailer and the group-buying threshold value (\( \alpha = 0.5,\;\beta = 0.3 \))
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Ke, C., Yan, B. & Xu, R. A group-buying mechanism for considering strategic consumer behavior. Electron Commer Res 17, 721–752 (2017). https://doi.org/10.1007/s10660-016-9232-9

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