Title: Pricing of excess inventory on Groupon

Authors: Kyle D.S. Maclean; John G. Wilson; Srini Krishnamoorthy

Addresses: Richard Ivey School of Business, University of Western Ontario, London, ON, N6G 0N1, Canada ' Richard Ivey School of Business, University of Western Ontario, London, ON, N6G 0N1, Canada ' Beedie School of Business, Simon Fraser University, Burnaby, BC, V5A 1S6, Canada

Abstract: We consider the problem faced by a business that is considering using the Groupon platform to sell excess inventory. We discuss how demand functions can be derived using management knowledge. Then, using a single period model where excess inventory is exogenous, we show that the decision to use Groupon and the price to set on that channel depend on two parameters: the relative price sensitivity of Groupon customers as compared to the retailer's regular customers and the relative size of the Groupon market as compared to the regular market. Under a two-period model, when initial inventory is a decision, we show optimal inventory quantities. Our two-period model suggests that managers may plan on using Groupon and order inventory accordingly. We discuss the implications on third party channels as well as retail managers.

Keywords: pricing; inventory; Groupon; e-commerce platform.

DOI: 10.1504/IJRM.2017.084152

International Journal of Revenue Management, 2017 Vol.10 No.1, pp.52 - 74

Received: 19 May 2016
Accepted: 24 Mar 2017
Published online: 14 May 2017 *

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