Group Coupons: Interpersonal Bundling on the Internet

32 Pages Posted: 24 Oct 2012

See all articles by Yongmin Chen

Yongmin Chen

University of Colorado at Boulder - Department of Economics

Tianle Zhang

Lingnan University

Date Written: September 30, 2012

Abstract

Sellers 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.

Keywords: Interpersonal bundling, group coupon, group discount, demand uncertainty

JEL Classification: L1, L86, M3

Suggested Citation

Chen, Yongmin and Zhang, Tianle, Group Coupons: Interpersonal Bundling on the Internet (September 30, 2012). NET Institute Working Paper No. 12-09, Available at SSRN: https://ssrn.com/abstract=2164366 or http://dx.doi.org/10.2139/ssrn.2164366

Yongmin Chen (Contact Author)

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309-0256
United States
303-492-8736 (Phone)
303-492-8960 (Fax)

Tianle Zhang

Lingnan University ( email )

8 Castle Peak Road
Lingnan University
Hong Kong, New Territories
China

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