Group‐buying with products of heterogeneous quality

The present paper proposes a model with vertical differentiation to study firms' incentives using group‐buying. We look into two cases. In the first study, firms are restricted to use the same threshold. If the low‐tech firm uses group‐buying, the high‐tech firm follows suit. The reverse does n...

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Bibliographic Details
Published inManagerial and decision economics Vol. 44; no. 4; pp. 2408 - 2423
Main Authors Song, Hui, Ma, Hongkun, Ma, Zimeng
Format Journal Article
LanguageEnglish
Published Chichester Wiley Periodicals Inc 01.06.2023
Subjects
Differentiation
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Summary:The present paper proposes a model with vertical differentiation to study firms' incentives using group‐buying. We look into two cases. In the first study, firms are restricted to use the same threshold. If the low‐tech firm uses group‐buying, the high‐tech firm follows suit. The reverse does not necessarily hold but rather depends on parameters. In the second study, this restriction is relaxed. We find that the high‐tech firm tends to impose higher threshold than the low‐tech firm. The reason is that the price effect from using group‐buying is stronger for the high‐tech firm than the low‐tech firm.
Bibliography:Funding information
Hui Song is grateful for financial support from Guangdong University of Foreign Studies (Project No. 299‐X5220001 and No. 299‐GK19CQ92) and Guangdong Key Lab for Crop Germplasm Resources Preservation and Utilization (No. 2020B121201008); Hongkun Ma is grateful for financial support from the National Science Foundation of China (Project No. 72103210).
ISSN:0143-6570
1099-1468
DOI:10.1002/mde.3825