Research On Mechanism Of Group-Buying From The Perspective Of Countervailing Power

There are many scholars focused on the effect of seller's market structure on the market outcomes. But few studies analyzed the effect of buyer's market structure on the market and industry outcomes. When buyers are concentrated in the market, the sellers are more cautious to make the price in order to avoid high sales losses. Therefore, the buyer concentration is also a source of countervailing power. For this case, the representative is group-buying in reality. Because when buyers'concentration increased, they will have countervailing power to negotiate with sellers, and can get a discount from them. Whether consumers participate the group-buying or not mostly depends on the discount provided by sellers in this paper.Bradley J. Ruffle studied the buyers' concentration as a source of countervailing power from the perspective of empirical research. But there are few scholars study the problem from the perspective of mathematical modeling. Although there are some articles on the reasons of the group-buying formation, most of them did the research by empirical method. There are fewer researches focused on the mechanism of group-buying from the angle of countervailing power. Usually study on group-buying only considers two aspects' decision making from supplier to retailer. But group-buying market structure defined in this paper contains supplier, retailer and consumer.The purpose of this paper is to research the formation mechanism of group purchasing based on setting up a mathematical model. We obtain the pricing mechanism of group-buying, namely by forecasting the percentage of potential consumers who are willing to participate group-buying to get a discount, according to the different discount level r for consumers, obtaining the relationship between b and r. Then by bringing in a related expression about b and r, we get an equilibrium position.And we also extended the basic model by fixing the retailer price. All in all, I hope this paper can make a little contribution to the research of buyer countervailing power. And for real life businesses, it can provide some guidance for the group-buying industry development.