Group Coupons: Interpersonal Bundling on the Internet
Abstract
Sellers sometimes offer goods for sale under both a regular price and a discount for group purchase if the consumer group reaches some minimum size. This selling practice, which we term interpersonal bundling, has been popularized on the Internet by companies such as Groupon. We explain why interpersonal bundling is a profitable strategy in the presence of demand uncertainty, and how it may further boost profits by stimulating product information dissemination. Other reasons for its profitability are also discussed. We provide sufficient conditions for interpersonal bundling to dominate separate selling, and identify factors that determine the size of its profit advantage.Download Info
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Paper provided by NET Institute in its series Working Papers with number 12-09.Length: 31 pages
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:net:wpaper:1209
Contact details of provider:
Web page: http://www.NETinst.org/
Related research
Keywords: Interpersonal Bundling; Group Coupon; Group Discount; Demand Uncertainty;Find related papers by JEL classification:
- D4 - Microeconomics - - Market Structure and Pricing
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- M3 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-20 (All new papers)
- NEP-COM-2012-10-20 (Industrial Competition)
- NEP-ICT-2012-10-20 (Information & Communication Technologies)
- NEP-IND-2012-10-20 (Industrial Organization)
- NEP-MKT-2012-10-20 (Marketing)
References
References listed on IDEASPlease report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Adams, William James & Yellen, Janet L, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, MIT Press, vol. 90(3), pages 475-98, August.
- Yongmin Chen & Michael Riordan, 2011.
"Profitability of Product Bundling,"
Discussion Papers
1011-02, Columbia University, Department of Economics.
- Yongmin Chen & Michael H. Riordan, 2013. "Profitability Of Product Bundling," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(1), pages 35-57, 02.
- Justin P. Johnson & David P. Myatt, 2006.
"On the Simple Economics of Advertising, Marketing, and Product Design,"
American Economic Review,
American Economic Association, vol. 96(3), pages 756-784, June.
- David P. Myatt & Justin P. Johnson, 2004. "On the Simple Economics of Advertising, Marketing, and Product Design," Economics Series Working Papers 185, University of Oxford, Department of Economics.
- Chenghuan Sean Chu & Phillip Leslie & Alan Sorensen, 2011. "Bundle-Size Pricing as an Approximation to Mixed Bundling," American Economic Review, American Economic Association, vol. 101(1), pages 263-303, February.
- McAfee, R Preston & McMillan, John & Whinston, Michael D, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 371-83, May.
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