Threshold Effects in Online Group Buying

28 Pages Posted: 15 Nov 2012 Last revised: 6 Dec 2013

See all articles by Jiahua Wu

Jiahua Wu

Imperial College Business School

Mengze Shi

University of Toronto - Rotman School of Management

Ming Hu

University of Toronto - Rotman School of Management

Date Written: December 5, 2013

Abstract

This paper studies two types of threshold-induced effects: a surge of new sign-ups around the time when the thresholds of group-buying deals are reached, and a stronger positive relation between the number of new sign-ups and the cumulative number of sign-ups before the thresholds are reached than afterwards. This empirical study uses a dataset that records the inter-temporal cumulative number of sign-ups for group-buying deals in 86 city markets covered by Groupon, during a period of 71 days when Groupon predominantly used “a deal a day” format for each local market and posted the number of sign-ups in real time. We find that the first type of threshold effects is significant in all product categories and in all markets. The second type of threshold effects varies across product categories and markets. Our results underscore the importance of considering product and market characteristics in threshold design decisions for online group buying.

Keywords: Threshold effect, Group buying

Suggested Citation

Wu, Jiahua and Shi, Mengze and Hu, Ming, Threshold Effects in Online Group Buying (December 5, 2013). Rotman School of Management Working Paper No. 2176554. Available at SSRN: https://ssrn.com/abstract=2176554 or http://dx.doi.org/10.2139/ssrn.2176554

Jiahua Wu (Contact Author)

Imperial College Business School ( email )

Tanaka Building
South Kensington Campus
London, SW7 2AZ
United Kingdom
02075949851 (Phone)

HOME PAGE: http://www3.imperial.ac.uk/people/j.wu

Mengze Shi

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Ming Hu

University of Toronto - Rotman School of Management ( email )

105 St. George st
Toronto, ON M5S 3E6
Canada
416-946-5207 (Phone)

HOME PAGE: http://ming.hu

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