Group Coupons: Interpersonal Bundling on the Internet
AbstractSellers 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.
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Bibliographic InfoPaper provided by NET Institute in its series Working Papers with number 12-09.
Length: 31 pages
Date of creation: Sep 2012
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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)
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