Optimal group‐buying price strategy considering the information‐sharing of the seller and buyers in social e‐commerce

Abstract

AbstractAs one of the most popular forms of social e‐commerce, group‐buying price (GBP) is a widely used pricing mechanism. One typical example is PinDuoDuo, which was listed on the NASDAQ stock exchange in 2018. On the PinDuoDuo app, sellers generally encourage informed buyers to share information about products with uninformed buyers to increase sales volume. However, a growing number of sellers have begun using new methods (e.g., online live streaming) to share information with buyers themselves. In this article, we investigate optimal pricing decisions under various scenarios of product information‐sharing between sellers and buyers. We first investigate a scenario in which either the seller or the informed buyer alone shares information with the uninformed buyer. We then consider a scenario in which they share information together. Further, we extend our model to the situation that the unit cost of information‐sharing is nonlinear. We find that the seller will choose to share information herself when the cost of information‐sharing is small or the cost function is quadratic, whereas the seller will not always choose to act first when both the seller and the informed buyer share information. GBP strategy is preferred by the seller when the information gap between buyers is in a middle range. These results can help guide sellers in choosing efficient information‐sharing methods in social e‐commerce.