Optimal Pricing for Online Delivery Platforms with Group Buying and Direct Delivery

Abstract

Group buying is an emerging business model innovation in online delivery industry. In this paper, we model a platform which provides products and delivery service, including direct delivery and group buying. We study the behavior of customers and pricing strategy of platforms. The results show that: (1) Customers tend to choose group buying for low-price products and direct delivery for high-price products. (2) For platforms, the optimal price is first decreasing and then increasing in delivery fee. (3) The platforms could choose to become mid-end or high-end platform. Mid-end platforms would provide both services with low price and delivery fee while high-end platform would only provide direct delivery service with high price and high delivery fee.