Collective Attention and the Dynamics of Group Deals

Abstract:     
We present a study of the group purchasing behavior of daily deals in Groupon and LivingSocial and introduce a predictive dynamic model of collective attention for group buying behavior. In our model, the aggregate number of purchases at a given time comprises two types of processes: random discovery and social propagation. We find that these processes are very clearly separated by an inflection point. Using large data sets from both Groupon and LivingSocial we show how the model is able to predict the success of group deals as a function of time. We find that Groupon deals are easier to predict accurately earlier in the deal lifecycle than LivingSocial deals due to the final number of deal purchases saturating quicker. One possible explanation for this is that the incentive to socially propagate a deal is based on an individual threshold in LivingSocial whereas it is based on a collective threshold, which for the most part is reached very early on in Groupon. Furthermore, the personal benefit of propagating a deal is also greater in LivingSocial.

Number of Pages in PDF File: 10

Keywords: economics of attention, group deals

JEL Classification: D70

working papers series