Cooperation in Group-Buying Auctions

Cooperation among bidders in traditional auctions is generally forbidden because it is harmful to the interests of sellers. However, in a new type of online auction, the group-buying auction (GBA), cooperation results in higher bidding, leading to market expansion that benefits both buyers and sellers. We will show why the group-buying auction with cooperation (GBAC) weakly dominates the fixed-price mechanism (FPM) for the seller. Through a modeling analysis, we also offer insights into how the seller can set the price curve effectively, and offer an information sharing mechanism to facilitate bidding ring formation, as a means to maximize the value of this market mechanism.