Threshold Effects in Online Group Buying

Wu, Jiahua; Shi, Mengze; Hu, Ming

doi:10.1287/mnsc.2014.2015

Cited by 66 publications

(17 citation statements)

References 21 publications

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“…Kuppuswamy and Bayus (2013) use data to try and empirically understand the dynamics of crowdfunding, and find that the propensity of backers to contribute is influenced by how much has already been pledged. Similar effects are found by Wu et al (2014) in the context of group buying. This is consistent with the empirical and experimental literature on public goods.…”

Section: Related Literaturesupporting

confidence: 78%

A Dynamic Model of Crowdfunding

2016

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Crowdfunding is quickly emerging as an alternative to traditional methods of funding new products. In a crowdfunding campaign, a seller solicits financial contributions from a crowd, usually in the form of pre-buying an unrealized product, and commits to producing the product if the total amount pledged is above a certain threshold. We provide a model of crowdfunding in which consumers arrive sequentially and make decisions about whether to pledge or not. Pledging is not costless, and hence consumers would prefer not to pledge if they think the campaign will not succeed. This can lead to cascades where a campaign fails to raise the required amount even though there are enough consumers who want the product. The paper introduces a novel stochastic process-anticipating random walksto analyze this problem. The analysis helps explain why some campaigns fail and some do not, and provides guidelines about how sellers should design their campaigns in order to maximize their chances of success.

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Section: Related Literaturesupporting

confidence: 78%

A Dynamic Model of Crowdfunding

2016

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“…Chen and Roma (2011) show that, in contrast to the general convention, buyers who compete for consumers can suffer losses by adopting cooperative purchasing. Empirical studies are ample; see, for instance, Kauffman and Wang (2002), Wu, Shi, and Hu (2015), and henceforth. The prior literature mainly investigates group buying as a purchasing option that is initiated by vendors.…”

Section: Literature Reviewmentioning

confidence: 99%

How to deal with consumers who group to request a discount?

Qiu

Jiang

2019

Naval Research Logistics

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We investigate operations impacts of consumer‐initiated group buying (CGB), whereby consumers voluntarily form buying groups to negotiate bulk deals with retailers. This differs from regular purchasing whereby consumers visit retailers individually and pay posted prices. Upon the visit by group consumers, a retailer decides to forgo or satisfy their demand in its entirety. Turned down by a retailer, group consumers continue to visit other retailers. In the case where their group effort fails to conclude a deal, some group consumers switch to individual purchasing provided they receive a non‐negative utility by doing so. Even after a successful group event, the group consumers who forgo the event out of utility concern may switch to individual purchasing as well. Retailer competition, group size, and the chance that group consumers switch to individual purchasing upon unsatisfaction are crucial to how retailers adjust operations to deal with CGB. With retailer competition, the rise of CGB results in every consumer paying the same reduced price when group size is small but makes group consumers pay more than by purchasing individually when group size is large. This has mixed consequences on the profits for retailers in both absolute and relative terms.

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“…Empirical research has found supportive evidence to this strategy. Group buying or daily deal websites can facilitate product sales by displaying information on deal popularity or social influence (Li and Wu 2013;Luo et al 2014;Wu et al 2015).…”

Section: Related Literaturementioning

confidence: 99%

When Discounts Hurt Sales: The Case of Daily-Deal Markets

Cao

Hui

2018

Information Systems Research

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We investigate whether the discounts offered by online daily deals help attract consumer purchases. By tracking the sales of 19,978 deals on Groupon.com and conducting a battery of identification and falsification tests, we find that deep discounts reduce sales. A one-percent increase in a deal's discount decreases sales by 0.035-0.256 percent. If a merchant offers 10 percent more discount from the sample mean of 55.6 percent, the sales could decrease by 0.63-4.60 percent, or 0.80-5.24 units and $42-$275 in revenue. This negative effect of discount is more prominent among credence goods and deals with low sales, and when the deals are offered in cities with higher income and better education. Our findings suggest that consumers are concerned about product quality and excessive discounts may reduce sales immediately. A follow-up lab experiment provides further support to this quality concern explanation. Furthermore, it suggests the existence of a "threshold", viz. the negative effect on sales is present only when the discount is sufficiently high. Additional empirical analysis shows that deals displaying favorable third-party support, such as Facebook fans and online reviews, are more susceptible to this adverse discount effect. We draw related managerial implications.

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Threshold Effects in Online Group Buying

Cited by 66 publications

References 21 publications

A Dynamic Model of Crowdfunding

A Dynamic Model of Crowdfunding

How to deal with consumers who group to request a discount?

When Discounts Hurt Sales: The Case of Daily-Deal Markets

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