In recent years, many new and interesting business models for Internet-based selling have emerged with the advent of electronic commerce, one of which is the Internet-based group-buying. Since group-buying can be quickly built and removed, and the consumers can pay a lower price for the product through it, the group-buying can be a new online promotion form. In this chapter we build up a two-period pricing model for a supply chain when a supply chain member utilizes group-buying program to promote its products. In detail, we consider a supply chain consisting of a supplier and a retailer, where the supplier or retailer may launch a group-buying program to promote the products via a group-buying web site in the promotion period (i.e., the first period), as well as the supplier may sell its products through the retailer traditionally in both periods. Utilizing game theory, we derive the equilibrium decisions of the two supply chain members in three different scenarios, that is, (i) there is no group-buying program, (ii) the supplier launches a group-buying program, and (iii) the retailer launches a group-buying program. Analysis of the equilibrium decisions illustrates the following results: (i) both, the supplier and the retailer, will set low prices in the promotion period and high prices in the regular period; (ii) this trend will be enhanced when a group-buying program occurs, especially when such program is launched by the supplier; (iii) while the retailer can always benefit from a group-buying program, the supplier’s profit may be reduced under certain conditions; and (iv) in spite of the fact that the supplier’s profit may be damaged by the group-buying program, when the two supply chain members decide to launch a group-buying program, the unique equilibrium is that the supplier will launch such a program.
This work was supported by the National Natural Science Foundation of China (Grant no. 70901068, 71271198), the Funds for International Cooperation and Exchange of the National Natural Science Foundation of China (Grant no. 71110107024) and Chinese Universities Scientific Fund. Qinglong Gou would also like to acknowledge the Science Fund for Creative Research Groups of the National Natural Science Foundation of China (Grant no. 71121061) for supporting his research.
Gou, Q., Cheng, J., Zhang, J., Liang, L. and Li, S. (2013), "A two-period pricing model with group-buying", Applications of Management Science (Applications of Management Science, Vol. 16), Emerald Group Publishing Limited, pp. 193-218. https://doi.org/10.1108/S0276-8976(2013)0000016014Download as .RIS
Emerald Group Publishing Limited
Copyright © 2013 Emerald Group Publishing Limited