New buyers' arrival under dynamic pricing market microstructure: the case of group-buying discounts on the Internet

The current research studies the dynamics of one instance of dynamic pricing-group-buying discounts-used by MobShop.com, whose products' selling prices drop as more buyers place their orders. We use an econometric model to analyze changes in the number of orders for Mobshop-listed products over various periods of time. We find that the number of existing orders has a significant positive effect on new orders placed during each 3-hour period, indicating the presence of a positive participation externality effect. We also find evidence for expectations of falling prices, a price drop effect. Results also reveal a significant ending effect, as more orders were placed during the last 3-hour period of the auction cycles.