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Abstract

Group-purchase institutions, a type of Internet shopping website, allows consumers to aggregate their demands for a product to gain discounts in purchase price. Modeling consumers’ bidding behavior in this institution using the economic perspective of constraint, expectation, and preference interactions, we study two group-purchase mechanisms (i.e., conditional purchase and information cue) on a buyer’s purchase choice across competing group-purchase alternatives. Using a conditional purchase mechanism, a buyer is not obliged to commit to the purchase if the best price is not met (i.e., the final offered price is greater than the best available lowest price). Through the information cue, a buyer could obtain information on the current number of orders collected. We analyzed a set of laboratory experimental data based on a group-purchase institution using the stated choice method. We find that a buyer is more likely to buy through group-purchase when a conditional purchase mechanism is provided. However, providing more information does not necessarily alleviate buyer uncertainty and inertia. The presence of information cue does induce them to choose a riskier but cheaper group-purchase option. In such cases, the choice elasticity of a risky group-purchase option is more sensitive to the information cue than to the conditional purchase mechanism.

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