HOW PRICE DISPERSION INFLUENCES INTENTION TO JOIN ONLINE GROUP BUYING: THE ROLE OF PERCEIVED PRICE FAIRNESS
Abstract
The rapid evolution of E-commerce has catalyzed the proliferation of online group buying, a dynamic business model within the realm of online shopping that has garnered substantial attention from consumers and scholars alike (Luo et al., 2014; Wu et al., 2015). Online group buying, as a strategic approach to commerce, has emerged as a compelling mechanism for harnessing the collective purchasing power of consumers. This model revolves around the consolidation of buyers, leveraging their combined bargaining power to secure favorable prices, ultimately providing consumers with a cost advantage they would not attain through individual transactions. At its core, online group buying operates through the aggregation of demand and the application of volume discounting. By pooling the purchasing power of a large number of consumers, this model seeks to optimize transaction efficiency, mitigate transaction costs, and minimize transaction risks. The overarching objective is to augment consumers' utility in the consumption process, aligning with the principles of demand aggregation and volume discounting (Anand and Aron, 2003). This abstract embarks on an exploration of the intricacies surrounding online group buying, shedding light on its underlying principles and the dynamics that drive its success in the contemporary E-commerce landscape. Drawing on the insights of previous research (Luo et al., 2014; Wu et al., 2015), the narrative unravels the appeal of online group buying to both consumers and scholars. It delves into the mechanics of demand aggregation and volume discounting, illustrating how these elements synergize to create a win-win scenario, not only for consumers seeking cost-effective solutions but also for businesses aiming to optimize their market reach. In dissecting the significance of online group buying, this abstract underscores its role in not only providing economic advantages to consumers but also in reshaping the landscape of online commerce. By reducing transaction costs and risks, online group buying stands as a catalyst for enhancing the overall consumer experience. As businesses navigate the intricacies of E-commerce, understanding and harnessing the potential of online group buying emerges as a strategic imperative
Keywords:
E-commerce, Online Group Buying, Demand Aggregation,, Volume Discounting, Consumer UtilityDownloads
Published
DOI:
https://doi.org/10.5281/zenodo.10568852Issue
Section
How to Cite
License
Copyright (c) 2024 Dr. Mei Ling Zhang, Prof. Xiang Wei Chen
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
References
Adams, J. S.(1965),“Inequity in social exchange”,Advances in Experimental Social Psychology,Vol.2, pp. 267-299.
Aggarwal, P. andVaidyanathan, R. (2016), "Is font size a big deal? A transaction – acquisition utility perspective oncomparative price promotions", Journal of Consumer Marketing, Vol. 33 No. 6, pp.408-416,
Anand, K. S.and Aron, R. (2003),“Group buying on the web: A comparison of price-discovery mechanisms”,Management Science,Vol.49No.11, pp.1546-1562.
Ancarani, F. and Shankar, V. (2004),“Price levels and price dispersion within and across multiple retailer types: Further evidence and extension”, Journal of the Academy of Marketing Science,Vol. 32 No.2, pp.176-187.
Biswas, A. andBlair, E. A. (1991), “Contextual effects of reference price in retail advertisements”,Journal of Marketing, Vol.55 No.3,pp.1–12.
Bolton, L. E.,Warlop, L. and Alba, J. W.(2003), “Consumer perceptions of price (un)fairness”,Journal of Consumer Research,Vol.29 No.4, pp.474-491.
Campbell, M. C. (1999), “Perceptions of price unfairness antecedents and consequences”,Journal of Marketing Research, Vol.36 No.2, pp.187-199.
Chen, J.,Chen, X. and Song, X. (2002),“Bidder’s strategy under group-buying auction on the Internet”,IEEE Transactions on Systems, Man and Cybernetics, Vol. 32 No.6,pp.680-690.
Chen, J., Chen, X. and Song, X. (2007),“Comparison of the group-buying auction and the fixed-pricing mechanism”, Decision Support Systems, Vol. 43 No. 2,pp.445–459.
Chen, J., Chen, X.,Kauffman, R. J. and Song, X. (2009),“Should we collude? Analyzing the benefits of bidder cooperation in online group-buying auctions”, Electronic Commerce Research and Applications, Vol. 8 No. 4,pp.191–202.
Chen, P.-Y. andHitt, L. M. (2001),“Brand awareness and price dispersion in electronic markets”, in Proceedings of the
International Conference on Information Systems, New Orleans, Louisiana, USA,pp.233–246
Cheng, H.-H.andHuang, S. W. (2013),“Exploring antecedents and consequence of online group-buying intention: An extended perspective on theory of planned behavior”,International Journal of Information Management, Vol.33 No. 1,pp.185-198.
Cheung, M.-S., Myers, M. B. and Mentzer, J. T. (2010),“Does relationship learning lead to relationship value?A cross-national supply chain investigation”, Journal of Operations Management, Vol.28 No. 6,pp.472-487.
Chin, W. W. andNewsted, P. R. (1999),“Structural equation modeling analysis with small samples using partial least squares”, In Hoyle R. (Ed.)Statistical strategies for small sample research,Sage Publications, Beverley Hills, CA,pp. 307–341.
Chin, W. W. and Marcoulides, G. A. (1998).The partial least squares approach for structural equation modeling,Lawrence Erlbaum Associates Publishers, New Jersey.
Compeau, L. D., Lindsey-Mullikin, J., Grewal, D.,and Petty, R. D.(2005).“Consumers' interpretations of the semantic phrases found in reference price advertisements”.Journal of Consumer Affairs, Vol.38 No.1, pp. 178-187.
Darke, P. R. and Dahl, D. W. (2003),“Fairness and discounts: The subjective value of a bargain”,Journal of Consumer Psychology, Vol.13 No. 3,pp.328-338.
Falk, R. F. and Miller, N. B. (1992),A primer for soft modeling, University of Akron Press, Akron, Ohio.
Festinger,L. (1962),Atheory of cognitive dissonance. Stanford University Press, Stanford, CA.
Fornell, C. andBookstein, F. L.(1982), “Two structural equation models: LISREL and PLS applied to consumer exit-voice theory”,Journal of Marketing Research, Vol.19 No. 4,pp.440-452.
Fornell, C. and Larcker, D. F.(1981),“Evaluating structural models with unobserved variables and measurement errors”,Journal of Marketing Research, Vol.18 No. 1,pp.39–50.
Grewal, D., Hardesty, D. M. andIyer, G. R. (2004),“The effects of buyer identification and purchase timing on consumers’ perceptions of trust, price fairness, and repurchase intentions”,Journal of Interactive Marketing, Vol.18 No.4, pp.87-100.
Grewal, D., Krishnan, R., Baker, J. and Borin, N. (1998), “The effect of store name, brand name and price discount on consumers’ evaluations and purchase intentions”,Journal of Retailing, Vol.74 No.3,pp.331–352.
Gupta, A., Su, B.-C.and Walter, Z.(2004),“An empirical study of consumer switching from traditional to electronic channels: A purchase decision process perspective”, International Journal of Electronic Commerce,Vol.8 No.3, pp.131–161.
Hall, B. F.(1983).”Price Dispersion and the Gains from Search in Local Food Markets”.Journal of Consumer Affairs, Vol.17 No.2, pp. 388-401.
Hamilton, R. and Chernev, A. (2013),“Low prices are just the beginning: Price image in retail management”,Journal of Marketing,Vol.77 No.6,pp.1-20.
Helson, H. (1964),“Current trends and issues in adaptation-level theory”,American Psychologist, Vol. 19 No.1,pp.26– 38.
Huppertz, J. W.,Arenson, S. J. and Evans, R. H. (1978),“An application of equity theory to buyer-seller exchange situations”,Journal of Marketing Research, Vol.15 No.2,pp.250-260.
Jensen, T., Kees, J., Burton, S. and Turnipseed, F. L. (2003),“Advertised reference prices in an internet environment: Effects on consumer price perceptions and channel search intentions”,Journal of Interactive Marketing, Vol. 17 No.2, pp.20-33.
Jing, X. and Xie, J. (2011),“Group buying: A new mechanism for selling through social interactions”,Management Science, Vol.57 No.8,pp.1354-1372.
Kahneman, D.,Knetsch, J. L. and Thaler, R.(1986), “Fairness as a constraint on profit seeking: entitlements in the market”, The American Economic Review, Vol.76 No.4,pp.728-741.
Kauffman, R. J. and Wang, B. (2001), “New buyers’ arrival under dynamic pricing market microstructure: The case of group-buying discounts on the Internet”, Journal of Management Information Systems, Vol.18 No.2,pp.157–188.
Kauffman, R. J. and Wang, B. (2002),“Bid together, buy together: On the efficacy of group-buying business models in Internet-based selling”, in Handbook of electronic commerce in business and society, CRC Press,BocaRaton, FL, pp. 99–137.
Kauffman, R. J., Lai, H. and Ho, C.-T.(2010),“Incentive mechanisms, fairness and participation in online groupbuying auctions”, Electronic Commerce Research and Applications, Vol.9 No.3,pp.249-262.
Konuk, F. A. (2019),“The influence of perceived food quality, price fairness, perceived value and satisfaction on customers’ revisit and word-of-mouth intentions towards organic food restaurants,”Journal of Retailing and Consumer Services,Vol.50, pp. 103-110.
Kotler, P. and Keller, K. L. (2016), Marketing management.(15th ed.), Prentice Hall, New York.
Kumar, V., Hurley, M., Karande, K. and Reinartz, W. J. (1998),“The impact of internal and external reference prices on brand choice: The moderating role of contextual variables”, Journal of Retailing, Vol.74 No.3, pp.401-426.
Lastner, M. M., Fennell, P., Folse, J. A. G., Rice,D. H. andPorter, M. III. (2019),“I guess that is fair: How the efforts of other customers influence buyer price fairness perceptions,”Psychology & Marketing,Vol.36, No.7, pp.700–715.
Lowe, B. andAlpert, F. (2010),“Pricing strategy and the formation and evolution of reference price perceptions in new product categories,”Psychology & Marketing,Vol. 27, No.9, pp.846–873.
Luo, X., Andrews, M., Song, Y. andAspara, J. (2014),“Group-buying deal popularity”,Journal of Marketing,Vol.78 No.2,pp.20-33.
Lach, S. (2002),“Existence and persistence of price dispersion: An empirical analysis”,Review Economics and Statistics, Vol.84 No.3,pp.433–444.
Lai, H. and Zhuang, Y.-T. (2004), “Comparing the performance of group buying models with different incentive mechanisms”, in Web 2004-the third workshop on e-business, Washington D.C.
Lai, H., Doong, H.-S.and Yang, C.-Y. (2006),“The effect of price dispersion in an e-market on consumers’ intentions to join group buying”, in Proceedings of the 39th annual Hawaii international conference on system sciences, Hawaii.
Li,X.,Gu, B. and Liu, H. (2013),“Price dispersion and loss-leader pricing: Evidence from the online book industry”,Management Science,Vol.59 No.6, pp.1290-1308.
Lim, W. M. (2020),“An equity theory perspective of online group buying,”Journal of Retailing and Consumer Services,Vol. 54, pp. 1-11.
Marchand, A. (2014), "Joint consumption challenges in groups", Journal of Consumer Marketing, Vol. 31 No. 6/7,pp.483-493.
Martins, M. O.B. (1995), An experimental investigation of the effects of perceived price fairness on perceptions of sacrifice and value.Doctoral Dissertation, University of Illinois.
Martins, M. andMonroe, K. B. (1994),“Perceived price fairness: A new look at an old construct”,Advances in Consumer Research, Vol.21 No.1,pp.75-78.
Monroe, K. B. (1990), Pricing: Making profitable decisions. McGraw-Hill, NY.
Namkung, Y. and Jang, S. C. S. (2010), "Effects of perceived service fairness onemotions, and behavioral intentions in restaurants", European Journal of Marketing, Vol. 44 No. 9/10,pp.1233-1259.
Neter, J., Wasserman, W. andKutner, M. H. (1990),Applied linear statistical models: Regression, analysis of variance, and experimental designs, Irwin, Homewood, IL.
Overby, E. and Forman, C. (2015),“The effect of electronic commerce on geographic purchasing patterns and price dispersion”,Management Science, Vol.61 No.2,pp.431-453.
Pan, X., Ratchford, B. T. andShankar, V. (2002),“Can price dispersion in online markets be explained by differences in e-tailer service quality”,Journal of the Academy of Marketing Science,Vol.30 No.4, pp.433-445.
Pan, X., Ratchford, B. T. and Shankar, V.(2004),“Price dispersion on the Internet: A review and directions for future research”,Journal of Interactive Marketing, Vol.18 No.4, pp.116-135.
Ranganathan, C.,Dhaliwal, J. S. and Teo, T. S. H. (2004),“Assimilation and diffusion of web technologies in supply-chain management: An examination of key drivers and performance impacts”,International Journal of Electronic Commerce, Vol.9 No.1,pp.127–161.
Shiau, W.-L.andLuo, M. M. (2012),“Factors affecting online group buying intention and satisfaction: A social exchange theory perspective”,Computers in Human Behavior,Vol.28 No.6,pp.2431-2444.
Sherif, M. and Hovland, C. I. (1961),Social judgment –Assimilation and contrast effects in communication and attitude change, Yale University Press, New Haven, CT.
Shilony, Y. (1977), Mixed pricing in oligopoly”,Journal of Economic Theory.Vol.14,pp.373-388.
Sinha, R. K. and Adhikari, A. (2017), "Advertised reference price and sales price asanchors of the latitude of expected price and its impact on purchase intention", European Journal ofMarketing, Vol. 51 No. 9/10, pp.1597-1611.
Song, W. (2007),Research on the models of B2C online group-buying. Doctoral Dissertation, Central China Normal University.
Spears, N. and Singh, S. N. (2004),“Measuring attitude toward the brand and purchase intentions”,Journal of Current Issues and Research in Advertising, Vol.26 No.2,pp.53-66.
Stigler, G. J. (1961),“The economics of information”,The Journal of Political Economy, Vol.69 No.3,pp.213–225.
Straub, D. W. (1989), “Validating instruments in MIS research”,MIS Quarterly, Vol.13 No.2,pp.147–169.
Thaler, R. (1985),“Mental accounting and consumer choice”,Marketing Science, Vol.4 No.3,pp.199–214.
Tang, C. S. (2008), “United we may stand”,Wall Street Journal(Eastern edition),Vol.12, pp.10.
Tsvetovat,M., Sycara, K. P., Chenand, Y. and Ying, J. (2000),“Customer coalitions in the electronic marketplace”, inProceedings of the third workshop on agent mediated electronic commerce(AMEC-2000), Barcelona, Spain.
Urbany, J. E., Bearden,W. O., Kaicker, A. andBorrero, M. S. (1997), “Transaction utility effects when quality is uncertain”, Journal of the Academy of Marketing Science,Vol.25 No.1, pp.45-55.
Urbany, J. E., Bearden,W. O. and Weilbaker, D. C.(1988), “The effects of reference pricing on consumer perceptions and price search”, Journal of Consumer Research, Vol.15 No.1,pp.95–110.
Varian, H. R. (1980), “A model of sales”, American Economic Review,Vol.70 No.4,pp.651–659.
Vaidyanathan, R. and Aggarwal, P. (2003), “Who is the fairest of them all? An attributional approach to price fairness perceptions”, Journal of Business Research, Vol.56 No.6, pp.453-463.
Weisstein, F. L., Choi, P. and Andersen, P. (2019),“The role of external reference price in pay-what-youwant pricing: An empirical investigation across product types, “Journal of Retailing and Consumer Services,Vol.50, pp.170-178.
Wu, J.,Gaytán, E. and Ayala, A. (2013), “The role of online seller reviews and product price on buyers' willingness-to-pay: A risk perspective”, European Journal of Information Systems, Vol.22 No.4, pp.416-433.
Wu, J., Shi, M. and Hu, M. (2015), “Threshold effects in online group buying”, Management Science,Vol.61 No.9, pp.2025-2040.
Wu, K., Vassileva, J., N. and Zhao, Y. (2015),“How do you feel when you see a list of prices? The interplay among price dispersion, perceived risk and initial trust in Chinese C2C market,” Journal of Retailing and Consumer Services,Vol.25, pp. 36-46.
Xia, L., Monroe, K. B. and Cox, J. L.(2004), “The price is unfair! A conceptual framework of price fairness perceptions”, Journal of Marketing, Vol. 68 No.4, pp.1–15.
Zhang, Z. and Gu, G. (2015), “Effects of consumer social interaction on trust in online group-buying contexts: An empirical study in China”, Journal of Electronic Commerce Research, Vol.16 No.1,pp.1-21.
Zhou, G., Xu, K. and Liao, S. S.Y. (2013), “Do starting and ending effects in fixed-price group-buying differ?”,Electronic Commerce Research and Applications, Vol.12 No.2,pp.78-89.
