Is group-buying price mechanism a good choice in the business-to-business system?

Group-buying price mechanism is useful for online sales since the 1990s, yet it has not been widely applied in the business-to-business (B2B) environment. In this study, we consider a B2B supply chain with one supplier and multiple retailers. With our analytical model, we compare the supplier's profit under the flat price mechanism, individual quantity discount mechanism, and group-buying price mechanism. The results show that when retailers are homogeneous, the individual quantity discount mechanism is the best choice for the supplier. In situations with heterogeneous retailers (i.e., a large retailer and multiple small retailers), the group-buying price mechanism is the best choice when there is a moderate difference in market scale between retailers. However, the condition is quite strict. These findings also hold with a step-wise price menu set by the supplier. Our conclusions explain why the group-buying price mechanism is not widely used in the B2B environment and provide some advice for the supplier on how to choose suitable pricing mechanisms.