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1 Introduction: what is group buying
Group buying as a new shopping method and an effective marketing method has made rapid progress in recent years (Jing and Xie, 2011; Liao et al., 2012). Different individual buyers who are looking for the same product may find one another through the internet, then band together to negotiate with suppliers to get a discount based on the purchase volume, i.e. group buying is a discount model of pooling consumer demand and seeking quantity price discounts (Kauffman et al., 2010a). Anand and Aron (2003) conclude that there are two core elements of group buying: demand aggregation and volume discounting. Group buying starts with a group of consumers who have the same demand. Then they form a coalition, bargain with the suppliers based on volume, and negotiate a discount or other benefits such as free gifts or special services (Li et al., 2004). Consumers in groups can buy a wide range of goods including commodity items in daily use, home appliances, automobiles, upholstery materials, and even real estate. As more consumers join a group buying effort, the more bargaining power they have (Yuan and Lin, 2004). Chen et al. (2007) compare group buying actions to traditional quantity discount models and find two major differences. First, with traditional quantity discounts, suppliers set the discount quantity and price, and individual buyers order the product based on that information. In group buying, the price is determined by the total combined order of all the buyers. Second, in group buying actions, one buyer's order affects the other buyers because the price is dynamic and uncertain. As a new quantity discount model, enabled by internet technology that can bring different buyers together to pool their buying power, group buying may become increasingly effective with the continuous development and growth of e‐commerce.
2 Internet upscales group buying
Group buying consists of like‐minded individuals who join forces using a number of strategies to secure discounts that might not be otherwise achieved on their own. Group buying, under which consumers enjoy a discounted group price if they are willing and able to achieve a required group size and coordinate their transaction time, is similar to a cooperative, where informal groups organize and buy directly from...