Analysis of the Waiting Time Effects on the Financial Return and the Order Fulfillment in Web-based Group Buying Mechanisms

In general, consumers with a limited order size can join a buying group to form economies of scale and enjoy more beneficial deals from suppliers. Researchers have shown such demand aggregation mechanisms can theoretically outperform a direct purchase at the retail price. Nevertheless, group buying mechanisms introduced into the Internet marketplace during late 90s turned out to be unsuccessful and were forced out of the market one after another. Given that waiting time (i.e. the time during which consumer demand is aggregated) is the primary parameter of a group buying mechanism, it is important to meticulously study its effects on the performance of group buying systems. This study provides a novel empirical analysis of the effects of waiting time on the financial return and the order fulfillment of group buying mechanisms. The results of this research clearly demonstrate the presence of a trade-off between these two performance factors. Furthermore, the results also highlight the negative effects of having an unbalanced waiting time (i.e. setting waiting time too short or too long) on the performance of group buying mechanisms.