Optimal pricing for group buying with network effects

Zhang, Guoquan; Shang, Jennifer; Yıldırım, Pınar

doi:10.1016/j.omega.2015.10.003

Cited by 42 publications

(44 citation statements)

References 27 publications

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“…But it only includes the online business and there is no offline business [3].Preference uncertainty and consumption state uncertainty of customersare considered and by taking a comprehensive perspective, they find that no show of voucher buyers may not be a good thing for the merchant, especially for those large or start-up ones [12]. The impact of group-buying network positive effects and other negative effects are studied on the performance of group buying business model [13]. A start-up service provider who decides whether to advertise its service product by offering temporary daily deal promotion is considered and shows that both commission rate charged by daily deal website and the discount level offered by service provider play important roles in signaling the initially unobservable quality level of the service provider [14].…”

Section: International Conference On Applied Mathematics Simulation mentioning

confidence: 99%

The Effect of Customer Perceived Service Quality on the Optimal Group-Buying Strategy

Wu¹,

Zhu²

2016

Proceedings of the 2016 International Conference on Applied Mathematics, Simulation and Modelling

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Abstract-In this paper, we study the popular group-buying model in which theseller offers discount on the group-buying websites to attract new customers coming to experience its service. This paper analyses seller's pricing decision between only running offline business and joining the group-buying business. We find that when only running offline business, higher perceived service quality will bring more profit for the seller. However, if the seller joins the group-buying website and the perceived service quality is relatively low, seller's profit will decrease with it. If the seller's service quality is higher than the perceived service quality, he will improve his regular price after joining the group-buying website. Moreover, only when the group-buying website scale is relatively big can the seller make more profit by joining the group-buying website.

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Section: International Conference On Applied Mathematics Simulation mentioning

confidence: 99%

The Effect of Customer Perceived Service Quality on the Optimal Group-Buying Strategy

Wu¹,

Zhu²

2016

Proceedings of the 2016 International Conference on Applied Mathematics, Simulation and Modelling

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“…Under such a situation, the presence of other buyers in shopping instances can reduce a consumer’s uncertainty risk of product quality and thus enhance a consumer’s perceived quality of product [10]. In the field of GB, this kind of impact of other buyers’ presence on one’s perceived quality of product is called the positive “network effect” in the literature [11]. A positive network effect also arises for consumers in a GB option when buying with friends and family because of information exchange, affirmation of choice, and lower cognitive load when deciding what to buy [5].…”

Section: Introductionmentioning

confidence: 99%

“…Generally, it is sometimes inconvenient and/or unenjoyable when buying with others in GB, and thus we call this kind of impact of other buyers’ presence “negative network effect”. The negative network effect is also called “negative externality” in the literature [11].…”

Section: Introductionmentioning

confidence: 99%

“…Considering both positive and negative network effects, Zhang et al [11] argue that when the positive network effects from participation are higher relative to the cost externality, a firm is more likely to favor a GB strategy over an IB strategy. In some cases, the negative network effects in buying within a group may surpass the positive network effect of buying with a social circle.…”

Section: Introductionmentioning

confidence: 99%

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A pricing model for group buying based on network effects

2019

PLoS ONE

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Group buying (GB) is a popular business model in e-commerce. With the rise of online social media, the positive network effect of buying with others is more important than price discount for consumers to choose GB. However, the negative network effect of GB is also significant for some consumers. In this paper, we classify consumers into two segments considering both positive and negative network effects, and three possible sales strategies as well as their optimal decisions on price are presented. We find that GB strategy dominates individual buying (IB) strategy when the positive network effect is sufficiently high or the proportion of consumers with low valuation is relatively large. We also find that MIX strategy offering both IB and GB is always better than IB, while the relationship between MIX and GB is depending on actual market situations. Some other managerial insights are also discussed.

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“…These methods do not take into account the issue of economic efficiency, such as Pareto efficiency or social surplus. Paper [13] considers the participants' externalities and puts forward the online pricing mechanism. Vickrey purposed an counterspeculation mechanism in the paper [4], which is the rudiment of VCG mechanism.…”

Section: Introductionmentioning

confidence: 99%

Allocation and Pricing of Online Group-Buying Based on the Continuous Price Function

Zhu¹,

Zhu²,

Yang³

2018

EasyChair Preprints

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Group-Buying has becoming a popular commodity trading mode in current business modes. However, the existing unified price of group-buying often determine the price by setting the ladder function according to the final quantities. This method not only ignores the contributions of participants to group-buying, but also cannot overcome the impact of buyers' false reports on group buying mechanism. In this paper, a pricing method of online group-buying based on continuous price function is proposed. We adopt an algorithm called VCG4GB, buyers' payments are the sum of commodities price and the extra amount by purchase quantity. The mechanism motivates buyers to report truthful preference through the compensatory payment. We prove that the mechanism has economic attributes such as incentive compatibility through theoretical proof and simulation experiments.

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Optimal pricing for group buying with network effects

Cited by 42 publications

References 27 publications

The Effect of Customer Perceived Service Quality on the Optimal Group-Buying Strategy

The Effect of Customer Perceived Service Quality on the Optimal Group-Buying Strategy

A pricing model for group buying based on network effects

Allocation and Pricing of Online Group-Buying Based on the Continuous Price Function

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