Group buying under quantity discounts

When a seller offers quantity discounts, interested buyers may either self-organize or rely on a third party to aggregate their purchasing quantities to obtain lower prices, referred to as group buying. A group buying mechanism is a set of rules that determine the amount each buyer will purchase and the price each buyer will pay. In this paper, we analyze and compare the outcomes of group buying given a seller’s quantity discount schedule under both the uniform price (where buyers pay at the same unit price obtained by the group) and the proportional group buying mechanism (where buyers share group savings proportional to their purchasing quantities). Outcomes when buyers buy alone and under centralized purchasing are also presented. Finally, we study a seller’s optimal discount schedule when buyers form groups.