E-tailer’s supply chain structures in group buying: Monopolistic or competitive retailing?

ABSTRACT

We investigate the design of online group buying considering consumer characteristics under two different supply chain structures. Under monopolistic retailing, the e-tailer sells products through individual buying and group buying options simultaneously. Under competitive retailing, two e-tailers sell products through individual buying and group buying options respectively. We employ a stylized game-theoretical model to investigate equilibrium pricing and group size threshold decisions under two supply chain structures, and characterize the e-tailer’s optimal supply chain structure as well as study its impacts on the manufacturer and consumers. We show that the e-tailer always prefers a relatively high (high or low) group size threshold in the monopolistic (competitive) supply chain. Moreover, we find that the e-tailer chooses the monopolistic or competitive supply chain structure depending on combined parameters. Consequently, the e-tailer’s optimal supply chain structure may lead to an all-win or all-loss situation for the manufacturer and consumers. Our results underscore the importance in pricing and threshold decisions for online group buying and provide managerial insights for the group buying industry.

KEYWORDS AND PHRASES:

• Supply chain structure
• group buying
• monopolistic retailing
• competitive retailing
• game theory
• e-retail
• online pricing

Supplemental data

Supplemental data for this article can be accessed on the publisher’s website.

Acknowledgments

The authors would like to thank the Editor-in-Chief and two anonymous reviewers for their constructive comments and suggestions. This work was supported by the National Natural Science Foundation of China (grant numbers 72071216, 71672199).

Additional information

Notes on contributors

Shuxing Sun

SHUXING SUN ([email protected]) is a Ph.D. candidate from the Lingnan College at Sun Yat-sen University, Guangzhou, China. His research interests include community group buying, e-commerce, channel distribution strategy, interface between operations and finance, and interface between operations and marketing. Dr. Sun has published in International Journal of Electronic Commerce, Managerial and Decision Economics, and other journals.

Bin Zhang

BIN ZHANG ([email protected]; corresponding author) is a professor in School of Business at Sun Yat-sen University, Guangzhou, China. He received his Ph.D. degree in Management Science and Engineering at the University of Science and Technology of China. Dr. Zhang’s research interests include operations management, e-commerce, supply chain management, business model innovation, and interface between operations and finance. His work has been published in such journals as European Journal of Operational Research, Journal of the Operational Research Society, International Journal of Production Research, International Journal of Production Economics, American Journal of Operations Research, and others

Yiting Huang

YITING HUANG ([email protected]) is a postgraduate student in Lingnan College at Sun Yat-sen University, Guangzhou, China. His research interests include e-commerce, supply chain management, and interface between operations and finance.