The Effect of Price Dispersion in an e-Market on Consumers’ Intentions to Join Group Buying

Abstract

Based on the economics theory of information and the transaction utility theory, this paper shows how the market price dispersion affects a consumer’s intention to join group-buying transactions using the transaction utility, which compares the consumer’s internal reference price and the predicted final price of group buying. The experimental data show that consumers consistently perceive a higher internal reference price as well as a higher predicted final price of group buying in a market with narrow price dispersion. Consumers also perceive a higher transaction utility in a market with narrow price dispersion, except in the best case. Furthermore, the transaction utility in the most-probable case is the highest irrespective of the price dispersion. This is consistent with the transaction utility in the most-probable case being most strongly correlated with the intention to join group buying. Overall, consumers exhibit a higher intention to join group buying in a market with narrow price dispersion, and our results also show that the percentage of subjects joining group buying is much higher in a market with narrow price dispersion than in one with wide price dispersion.