Group Buying as a Competitive Platform

• DOI: 10.2139/ssrn.4375272
• Publication Date: 2023-03-06T19:14:15Z
• Authors: Ming Fan; Yong Tan; Zihao zhang

The growth of e-commerce in the past decade has largely been driven by consumers urban areas with fast Internet access and savvy digital skills. Yet, there is a large demographic group low purchasing powers, especially developing economies, that have ignored platforms. Those consumers, usually living rural small cities, are less savvy, often overwhelmed complicated shopping websites, always looking for bargain necessity products. New platforms such as Pingduoduo (PDD) China CityMall India challenging their bigger rivals targeting these untapped markets. At new platforms, customers can gather group-buying, exchanging time patience prices. We develop game theoretical model to study whether platform attracts serves affluent be viable strategy compete an incumbent. This paper some interesting findings. First, specializes buying target low-value buyers first who more willing exchange waiting bargain. Second, high-value will only join when deal than certain threshold. Third, equilibrium discount from increases valuation but decreases buyers. In equilibrium, buyer surplus. It overall social welfare portion exceeds research provides important insightful managerial policy implications on competition.