A game theoretic strategic model for understanding the online-offline competition and fairness concern under community group buying

Abstract

<p style='text-indent:20px;'>The continuous growth of e-commerce leads to the emergence of a new supply chain model known as community group buying, which is advantageous to address the inefficiencies and higher costs of intermediate processes. However, its appearance results in fairness concerns for other participating merchants. In this regard, we construct a model with two suppliers, one wholesaler, and two retailers for three different scenarios of the initial status, fairness neutrality, and fairness concern, and comparatively analyze the game equilibria in different scenarios. The results show that the profits of the suppliers and the wholesaler significantly increase after the online retailer enters into the market, whereas the offline retailer's profit has multiple prospects. The online retailer's entry into the marketplace weakens the market position of the offline retailer and significantly erodes its pricing advantage. Additionally, our paper finds that the entry of the online retailer is beneficial for social welfare, and investment conversion efficiency on the platform construction is the core factor for the improvement of social welfare. On the contrary, the influence of fairness concern on social welfare is quite limited and only affects the internal distribution of benefits.</p>