Values of private traffic for community group-buying platform: A game-theoretic model of subsidy strategy choice

Community leader, by leveraging highly sticky private traffic, has become crucial force in the market expansion of community group-buying platforms. Subsidizing community leader’s private traffic can effectively enhance the conversion rate from traffic to orders. Prior research has predominantly focused on platform subsidy strategies for public traffic, with limited attention to private traffic, particularly in comparative analyses of subsidies for both types of traffic. By adopting a unique perspective on the value of private traffic, we develop a game-theoretic model to investigate how private traffic influences the operational strategies of community group-buying platforms, with particular emphasis on new entrant. Our findings reveal that an entry platform tends to subsidize the user group with greater traffic upon market entry. Although such subsidies incur higher subsidy costs, the benefits are more substantial. Under both subsidy strategies, the incumbent platform generally responds by lowering prices, resulting in a decline in its profits. Notably, other market parameters, such as the maximum changing cost, exert asymmetric positive or negative moderating effects on the value of private traffic, collectively influencing platform market performance and profitability. These results provide novel insights into future research on private traffic and the market entry of community group-buying platforms.