Optimal pricing strategy for advance selling through group buying

Purpose To encourage more advance sales, many retailers adopt group buying strategy in the context of advance selling. Consumers with uncertain valuations have opportunities to form a purchasing group and enjoy a discounted price during the advance selling period. This paper develops a model that examines the retailer's equilibrium decisions considering the decision-making process of consumers. Design/methodology/approach This paper uses game theory to model the interaction of a retailer and consumers in the context of advance selling. Findings The authors first find that the retailer can benefit more from advance selling through group buying no matter what the unit procurement cost is high or low. Specifically, the retailer should adopt a low (high) pricing strategy when the cost is low (high). Secondly, theoretical results show that the selling strategy that the retailer chooses to implement will not influence the selling prices during both periods. However, this finding is not consistent under the high pricing strategy. Finally, the impact of group size on the retailer's profit is different in different pricing strategies. Practical implications These results provide some suggestions for the retailer on how to implement group buying strategy in the context of advance selling. Originality/value This paper introduces a new advance selling strategy, called advance selling through group buying.