A pricing method of online group-buying for continuous price function

Abstract

Group-buying has become a popular commodity trading mode in current business modes. However, the existing unified price of group-buying often determines the price by setting the ladder function according to the final quantities. This method not only ignores the contributions of participants to group-buying, but also leads to the phenomenon of buyers’ false reports. In this paper, a pricing method of online group-buying based on continuous price function is proposed. We adopt an algorithm called Vickrey–Clarke–Groves for group-buying; buyers’ payments are the sum of commodities’ price and the extra amount by purchase quantity. The mechanism motivates buyers to report truthful preference through the compensatory payment. We prove that the mechanism has economic attributes such as incentive compatibility through theoretical proof and simulation experiments.