Group-Buying And Channel Coordination Under Asymmetric Information

Keywords

Asymmetric information; Channel; E-commerce; Group buying

Abstract

Social media and improvements in technology allow retailers to offer a group-buying option to consumers in a variety of markets. Extant research shows that when consumers are sufficiently heterogeneous, group-buying helps a retailer practice price discrimination. Our paper examines when a manufacturer may prefer its reseller to employ the group-buying mechanism in conjunction with a traditional posted price. In our model, the retailer is privately informed about market heterogeneity, which is summarized via the relative size and the level of price sensitivity of two consumer segments. We show that any value to the manufacturer, of requiring the retailer to offer group-buying, revolves around how profitability varies with market heterogeneity. Our principal finding is that group-buying benefits the manufacturer more when the retailer is privately informed about market size than about the level of consumer price sensitivity.

Publication Date

1-1-2017

Publication Title

European Journal of Operational Research

Volume

256

Issue

1

Number of Pages

68-75

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1016/j.ejor.2016.05.054

Socpus ID

84990187826 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/84990187826

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