Journal
MANAGEMENT SCIENCE
Volume 59, Issue 12, Pages 2805-2822Publisher
INFORMS
DOI: 10.1287/mnsc.2013.1740
Keywords
promotion; group buying; coordination game
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This paper studies the design of group-buying mechanisms in a two-period game where cohorts of consumers I arrive at a deal and make sign-up decisions sequentially. A firm can adopt either a sequential mechanism where the firm discloses to second-period arrivals the number of sign-ups accumulated in the first period, or a simultaneous mechanism where the firm does not post the number of first-period sign-ups and hence each cohort of consumers faces uncertainty about another cohort's size and valuations when making sign-up decisions. Our analysis shows that, compared with the simultaneous mechanism, the sequential mechanism leads to higher deal success rates and larger expected consumer surpluses. This result holds for a multiperiod extension and when the firm offers a price discount schedule with multiple breakpoints. Finally, when the firm can manage the sequence of arrivals, it should inform the smaller cohort of consumers first.
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