Journal
JOURNAL OF INDUSTRIAL AND MANAGEMENT OPTIMIZATION
Volume 9, Issue 2, Pages 291-304Publisher
AMER INST MATHEMATICAL SCIENCES-AIMS
DOI: 10.3934/jimo.2013.9.291
Keywords
Group-buying price; cooperative strategy; compensation mechanism; information
Categories
Funding
- National Natural Science Foundation of China [70890082, 70932005]
- Tsinghua University Initiative Scientific Research Program [20101081741]
- Research Grants Council of Hong Kong under RGF [410509]
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Group-buying price is a new pricing mechanism originated from Internet bidding. It has been proved that, with this pricing mechanism, buyers' cooperation in a B2C environment is beneficial for both the seller and buyers. The contribution of this paper is two-fold. First, we formally prove that, when buyers' valuation on the product is transparent and known information, the optimal form of buyers' cooperation is to organize only one bidding ring with all buyers. Second, we study how cooperation with all buyers can be organized if each buyer's valuation of the product is private information not known to others. We find that there may not exist a feasible compensation mechanism such that all buyers will report their true values in the cooperative coalition. Given that buyers may hide some information and report a lower value, we show that it is still possible to organize the cooperation if the number of buyers with higher values is large enough.
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