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Pricing of excess inventory on Groupon

Author

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  • Kyle D.S. Maclean
  • John G. Wilson
  • Srini Krishnamoorthy

Abstract

We consider the problem faced by a business that is considering using the Groupon platform to sell excess inventory. We discuss how demand functions can be derived using management knowledge. Then, using a single period model where excess inventory is exogenous, we show that the decision to use Groupon and the price to set on that channel depend on two parameters: the relative price sensitivity of Groupon customers as compared to the retailer's regular customers and the relative size of the Groupon market as compared to the regular market. Under a two-period model, when initial inventory is a decision, we show optimal inventory quantities. Our two-period model suggests that managers may plan on using Groupon and order inventory accordingly. We discuss the implications on third party channels as well as retail managers.

Suggested Citation

  • Kyle D.S. Maclean & John G. Wilson & Srini Krishnamoorthy, 2017. "Pricing of excess inventory on Groupon," International Journal of Revenue Management, Inderscience Enterprises Ltd, vol. 10(1), pages 52-74.
    • Handle: RePEc:ids:ijrevm:v:10:y:2017:i:1:p:52-74
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    Cited by:

    1. Zhang, Cheng & Yang, Fan & Ke, Xinyou & Liu, Zhifeng & Yuan, Chris, 2019. "Predictive modeling of energy consumption and greenhouse gas emissions from autonomous electric vehicle operations," Applied Energy, Elsevier, vol. 254(C).

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