Retailers´ optimal group purchase strategy in competitive online market

Group Purchase is discussed for a distribution channel including one manufacturer and three retailers. Retailers´ optimal order quantities and optimal profits are analyzed under two kinds of strategies, namely the separate purchase and group purchase. Then the optimal ordering strategy is discussed for the single retailer under the various modes of cooperation. The results are shown that the dominant retailer (the retailer with bigger share) in group buying will take some incentive measures to attract weak retailers (the retailers with smaller share) to work together, as to achieve the optimal profit of each. In addition, numerical examples are given to illustrate the validity and rationality of the model and the incentive mechanism.