Joint decision of pricing and advertising investment for online group-buying under intersecting demand regimes

Abstract

Online group-buying is a new kind of online sales mechanism which is dominant posted pricing under intersecting demand regimes. This manucript base on the assumption of the intersecting demand regimes to build a model to analyze the relationship between advertising investment and pricing and discuss the optimal joint decision-making of advertising investment and price. We derive the seller's optimal strategy under three decision-making paths and compare the seller's revenue with those that obtain under the more conventional posted-price mechanism. Our results show that when the demand for advertisement is unrelated the demand for prices, the seller's revenue from online group-buying mechanism is strictly outperform the revenue from posted pricing. © 2013 Asian Network for Scientific Information.