The Order Strategies for Competitive Retailers under the Group Buying Auction

In this paper, we consider a supply chain with one supplier and two retailers, where the supplier offers the Group Buying Auction (GBA), a novel pricing mechanism, to attract the small-sized retailers who cannot enjoy the low price in the traditional quantity discount. We deal with the situation where the market demand for each retailer is random and independent, and the retailers are noncooperative in placing their orders. By applying the noncooperative game theory, we derive the retailers´ optimal strategies and show that the retailers will get more profits under the GBA than those under the traditional quantity discount mechanism.