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

Jian Chen; Lei Guan; Xiaoqiang Cai

doi:10.3934/jimo.2013.9.291

Article Contents

2013, Volume 9, Issue 2: 291-304. Doi: 10.3934/jimo.2013.9.291

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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
2.
School of Economics and Management, Tsinghua University, Haidian District, Beijing
3.
Department of Systems Engineering and Engineering Management, The Chinese University of Hong Kong, Shatin, N.T., Hong Kong

Received: March 31, 2012

Revised: April 30, 2012

Published: March 2013

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Abstract

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.

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Mathematics Subject Classification: Primary: 91B24, 91B44; Secondary: 49N30.

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