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A pricing model for group buying based on network effects.

Guanqun Ni1

  • 1College of Management, Fujian Agriculture and Forestry University, Fuzhou, Fujian, China.

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This summary is machine-generated.

Group buying (GB) offers advantages over individual buying (IB) when positive network effects are high or low-valuation consumers are numerous. A mixed strategy (MIX) combining GB and IB is superior to IB alone.

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Area of Science:

  • E-commerce
  • Consumer behavior
  • Marketing strategy

Background:

  • Group buying (GB) is a prevalent e-commerce model.
  • Consumer choice in GB is increasingly influenced by social network effects over price discounts.
  • Both positive and negative network effects impact consumer decisions in GB.

Purpose of the Study:

  • To segment consumers based on network effects in group buying.
  • To analyze optimal pricing and sales strategies for e-commerce platforms.
  • To compare the performance of individual buying (IB), group buying (GB), and mixed (MIX) strategies.

Main Methods:

  • Consumer segmentation considering positive and negative network effects.
  • Game theory or economic modeling to determine optimal pricing.
  • Comparative analysis of different sales strategies (IB, GB, MIX).

Main Results:

  • GB strategy outperforms IB when positive network effects are strong or low-valuation consumers are abundant.
  • The MIX strategy consistently surpasses the IB strategy.
  • The relative performance of MIX versus GB strategies is contingent on market conditions.

Conclusions:

  • Understanding consumer network effects is crucial for optimizing e-commerce sales strategies.
  • GB and MIX strategies offer significant potential for e-commerce platforms.
  • Market-specific analysis is necessary to determine the most effective sales approach.