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April  2013, 9(2): 291-304. doi: 10.3934/jimo.2013.9.291

Analysis on Buyers' cooperative strategy under group-buying price mechanism

1. 

Research Center of Contemporary Management, Tsinghua University, School of Economics and Management, Tsinghua University, Haidian District, Beijing, China

2. 

School of Economics and Management, Tsinghua University, Haidian District, Beijing, China

3. 

Department of Systems Engineering and Engineering Management, The Chinese University of Hong Kong, Shatin, N.T., Hong Kong

Received  April 2012 Revised  May 2012 Published  February 2013

Group-buying price is a new pricing mechanism originated from Internet bidding. It has been proved that, with this pricing mechanism, buyers' cooperation in a B2C environment is beneficial for both the seller and buyers. The contribution of this paper is two-fold. First, we formally prove that, when buyers' valuation on the product is transparent and known information, the optimal form of buyers' cooperation is to organize only one ``bidding ring'' with all buyers. Second, we study how cooperation with all buyers can be organized if each buyer's valuation of the product is private information not known to others. We find that there may not exist a feasible compensation mechanism such that all buyers will report their true values in the cooperative coalition. Given that buyers may hide some information and report a lower value, we show that it is still possible to organize the cooperation if the number of buyers with higher values is large enough.
Citation: Jian Chen, Lei Guan, Xiaoqiang Cai. Analysis on Buyers' cooperative strategy under group-buying price mechanism. Journal of Industrial & Management Optimization, 2013, 9 (2) : 291-304. doi: 10.3934/jimo.2013.9.291
References:
[1]

S. K. Anand and R. Aron, Group buying on the web: A comparison of price-discovery mechanisms,, Management Science, 49 (2003), 1546.   Google Scholar

[2]

J. Chen, X. Chen and X. Song, Bidder's strategy under group-buying auction on the Internet,, IEEE Transactions on Systems Man and Cybernetics Part A-Systems and Humans, 32 (2002), 680.   Google Scholar

[3]

J. Chen, X. Chen and X. Song, A comparison of the group-buying auction and the fixed-pricing mechanism,, Decision Support Systems, 43 (2007), 445.   Google Scholar

[4]

J. Chen, X. Chen, R. J. Kauffman and X. Song, Should we collude? Analyzing the benefits of bidder cooperation in online group-buying auctions,, Electronic Commerce Research and Applications, 8 (2009), 191.   Google Scholar

[5]

J. Chen, R. J. Kauffman, Y. H. Liu and X. Song, Segmenting uncertain demand in group-buying auctions,, Electronic Commerce Research and Applications, 9 (2010), 126.   Google Scholar

[6]

R. J. Dolan, Quantity discounts: Managerial issues and research opportunities,, Marketing Science, 6 (1987), 1.   Google Scholar

[7]

J. Feng, Optimal mechanism for selling a set of commonly ranked objects,, Marketing Science, 27 (2008), 501.   Google Scholar

[8]

X. Jing and J. Xie, Group buying: A new mechanism for selling through social interactions,, Management Science, 57 (2011), 1354.   Google Scholar

[9]

R. J. Kauffman and B. Wang, New buyers' arrival under dynamic pricing market microstructure: The case of group-buying discounts on the Internet,, Journal of Management Information Systems, 18 (2002), 157.   Google Scholar

[10]

R. J. Kauffman and B. Wang, Bid together, buy together: On the efficacy of group-buying business models in Internet-based selling,, in, (2002).   Google Scholar

[11]

P. Klemperer, "Collusion and Predation in Auctin Markets,", Working paper, (2001).   Google Scholar

[12]

A. M. Kwasnica, "A Theory of Collusion in Multiple Object Simultaneous Auctions,", Working paper, (2002).   Google Scholar

[13]

R. P. McAfee and J. D. McMillan, Bidding rings,, The American Economic Review, 82 (1992), 579.   Google Scholar

[14]

W. J. Mead, A. Moseidjord and P. E. Sorenson, Natural resource disposal policy: Oral auction versus sealed bids,, Natural Resources Journal, 7 (1967), 195.   Google Scholar

[15]

M. Pesendorfer, A study of collusion in first-price auctions,, Review of Economic Studies, 67 (2000), 381.   Google Scholar

[16]

M. S. Robinson, Collusion and the choice of auction,, The RAND Journal of Economics, 16 (1985), 141.   Google Scholar

[17]

A. Segev, C. Beam and J. Shanthikumar, Optimal design of Internet-based auctions,, Information Technology and Management, 2 (2001), 121.   Google Scholar

show all references

References:
[1]

S. K. Anand and R. Aron, Group buying on the web: A comparison of price-discovery mechanisms,, Management Science, 49 (2003), 1546.   Google Scholar

[2]

J. Chen, X. Chen and X. Song, Bidder's strategy under group-buying auction on the Internet,, IEEE Transactions on Systems Man and Cybernetics Part A-Systems and Humans, 32 (2002), 680.   Google Scholar

[3]

J. Chen, X. Chen and X. Song, A comparison of the group-buying auction and the fixed-pricing mechanism,, Decision Support Systems, 43 (2007), 445.   Google Scholar

[4]

J. Chen, X. Chen, R. J. Kauffman and X. Song, Should we collude? Analyzing the benefits of bidder cooperation in online group-buying auctions,, Electronic Commerce Research and Applications, 8 (2009), 191.   Google Scholar

[5]

J. Chen, R. J. Kauffman, Y. H. Liu and X. Song, Segmenting uncertain demand in group-buying auctions,, Electronic Commerce Research and Applications, 9 (2010), 126.   Google Scholar

[6]

R. J. Dolan, Quantity discounts: Managerial issues and research opportunities,, Marketing Science, 6 (1987), 1.   Google Scholar

[7]

J. Feng, Optimal mechanism for selling a set of commonly ranked objects,, Marketing Science, 27 (2008), 501.   Google Scholar

[8]

X. Jing and J. Xie, Group buying: A new mechanism for selling through social interactions,, Management Science, 57 (2011), 1354.   Google Scholar

[9]

R. J. Kauffman and B. Wang, New buyers' arrival under dynamic pricing market microstructure: The case of group-buying discounts on the Internet,, Journal of Management Information Systems, 18 (2002), 157.   Google Scholar

[10]

R. J. Kauffman and B. Wang, Bid together, buy together: On the efficacy of group-buying business models in Internet-based selling,, in, (2002).   Google Scholar

[11]

P. Klemperer, "Collusion and Predation in Auctin Markets,", Working paper, (2001).   Google Scholar

[12]

A. M. Kwasnica, "A Theory of Collusion in Multiple Object Simultaneous Auctions,", Working paper, (2002).   Google Scholar

[13]

R. P. McAfee and J. D. McMillan, Bidding rings,, The American Economic Review, 82 (1992), 579.   Google Scholar

[14]

W. J. Mead, A. Moseidjord and P. E. Sorenson, Natural resource disposal policy: Oral auction versus sealed bids,, Natural Resources Journal, 7 (1967), 195.   Google Scholar

[15]

M. Pesendorfer, A study of collusion in first-price auctions,, Review of Economic Studies, 67 (2000), 381.   Google Scholar

[16]

M. S. Robinson, Collusion and the choice of auction,, The RAND Journal of Economics, 16 (1985), 141.   Google Scholar

[17]

A. Segev, C. Beam and J. Shanthikumar, Optimal design of Internet-based auctions,, Information Technology and Management, 2 (2001), 121.   Google Scholar

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