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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.

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