Incentive Mechanisms, Fairness and Participation in Group-Buying Auctions

The main idea of an online group-buying auction is to recruit enough people to generate a sufficient volume of orders to create the basis for a lower transaction price. Typically, the larger the number of orders, the more consumers will wish to participate. This is because the final auction price is...

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Main Authors: KAUFFMAN, Robert J., LAI, Hsiangchu, HO, Chao-Tsung
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Language:English
Published: Institutional Knowledge at Singapore Management University 2010
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Online Access:https://ink.library.smu.edu.sg/sis_research/2122
http://dx.doi.org/10.1016/j.elerap.2008.11.009
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spelling sg-smu-ink.sis_research-31222014-04-02T10:22:16Z Incentive Mechanisms, Fairness and Participation in Group-Buying Auctions KAUFFMAN, Robert J. LAI, Hsiangchu HO, Chao-Tsung The main idea of an online group-buying auction is to recruit enough people to generate a sufficient volume of orders to create the basis for a lower transaction price. Typically, the larger the number of orders, the more consumers will wish to participate. This is because the final auction price is likely to be lower than it would be otherwise. This positive feedback is a demand externalities phenomenon. Nevertheless, there also is a phenomenon of inertia that often occurs at the beginning of online group-buying auctions. Due to the small number of orders that occur in the beginning of an online group-buying auction, many potential participants are inclined to wait until the auction price for the sale item falls to an acceptable level. This only comes through the participation of more people in the auction. As a result, consumers will tend to wait for one another to join the auction. Thus, the startup inertia must be overcome before the number of orders will increase. We explore three incentive mechanisms to address this problem: sequence-based, time-based and quantity-based incentives. We conducted a series of experiments using an online group-buying auction experimental test bed deployed on the Internet to develop deeper insights into how these incentives work in the context of bakery cookie sales. Using theory to represent a variety of decision-making perspectives that can be applied in the online group-buying auction context, we explore whether the different incentive mechanisms cause consumers to perceive a lack of price fairness and procedural fairness in an auction’s operations. Our results suggest that consumers view participation discounts as creating the basis for perceptions of greater price fairness in online group-buying auctions. Compared with other incentive mechanisms, a sequence-based incentive mechanism gives consumers a sense of less procedural fairness. Finally, perceptions of fairness tend to have a positive association with price satisfaction and purchase intention. 2010-01-01T08:00:00Z text https://ink.library.smu.edu.sg/sis_research/2122 info:doi/10.1016/j.elerap.2008.11.009 http://dx.doi.org/10.1016/j.elerap.2008.11.009 Research Collection School Of Computing and Information Systems eng Institutional Knowledge at Singapore Management University Discount effects Experimental methods Fairness Group-buying auction Incentives Mechanism design Online auctions Price fairness Price satisfaction Procedural fairness Purchase intention Computer Sciences E-Commerce
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Discount effects
Experimental methods
Fairness
Group-buying auction
Incentives
Mechanism design
Online auctions
Price fairness
Price satisfaction
Procedural fairness
Purchase intention
Computer Sciences
E-Commerce
spellingShingle Discount effects
Experimental methods
Fairness
Group-buying auction
Incentives
Mechanism design
Online auctions
Price fairness
Price satisfaction
Procedural fairness
Purchase intention
Computer Sciences
E-Commerce
KAUFFMAN, Robert J.
LAI, Hsiangchu
HO, Chao-Tsung
Incentive Mechanisms, Fairness and Participation in Group-Buying Auctions
description The main idea of an online group-buying auction is to recruit enough people to generate a sufficient volume of orders to create the basis for a lower transaction price. Typically, the larger the number of orders, the more consumers will wish to participate. This is because the final auction price is likely to be lower than it would be otherwise. This positive feedback is a demand externalities phenomenon. Nevertheless, there also is a phenomenon of inertia that often occurs at the beginning of online group-buying auctions. Due to the small number of orders that occur in the beginning of an online group-buying auction, many potential participants are inclined to wait until the auction price for the sale item falls to an acceptable level. This only comes through the participation of more people in the auction. As a result, consumers will tend to wait for one another to join the auction. Thus, the startup inertia must be overcome before the number of orders will increase. We explore three incentive mechanisms to address this problem: sequence-based, time-based and quantity-based incentives. We conducted a series of experiments using an online group-buying auction experimental test bed deployed on the Internet to develop deeper insights into how these incentives work in the context of bakery cookie sales. Using theory to represent a variety of decision-making perspectives that can be applied in the online group-buying auction context, we explore whether the different incentive mechanisms cause consumers to perceive a lack of price fairness and procedural fairness in an auction’s operations. Our results suggest that consumers view participation discounts as creating the basis for perceptions of greater price fairness in online group-buying auctions. Compared with other incentive mechanisms, a sequence-based incentive mechanism gives consumers a sense of less procedural fairness. Finally, perceptions of fairness tend to have a positive association with price satisfaction and purchase intention.
format text
author KAUFFMAN, Robert J.
LAI, Hsiangchu
HO, Chao-Tsung
author_facet KAUFFMAN, Robert J.
LAI, Hsiangchu
HO, Chao-Tsung
author_sort KAUFFMAN, Robert J.
title Incentive Mechanisms, Fairness and Participation in Group-Buying Auctions
title_short Incentive Mechanisms, Fairness and Participation in Group-Buying Auctions
title_full Incentive Mechanisms, Fairness and Participation in Group-Buying Auctions
title_fullStr Incentive Mechanisms, Fairness and Participation in Group-Buying Auctions
title_full_unstemmed Incentive Mechanisms, Fairness and Participation in Group-Buying Auctions
title_sort incentive mechanisms, fairness and participation in group-buying auctions
publisher Institutional Knowledge at Singapore Management University
publishDate 2010
url https://ink.library.smu.edu.sg/sis_research/2122
http://dx.doi.org/10.1016/j.elerap.2008.11.009
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