Online group-buying is one of popular and innovative business models in the Internet age. Its essence is that the price will go down as the accumulated orders are increasing. A challenge is how to design the price curve, i.e., the relation between price and volume. Researchers have observed the consumer behavior phenomena of demand externalities, price-drop effect, and cycle ending effect in online group-buying transactions. All are related to the design of price curve. Therefore, if the price curve design can attract consumers and make profit as well, it will make the group-buying more successful. Based on above background, the purpose of this study is to explore the impact of price reduction frequency on consumers¡¦ perceived value and perceived transaction utility and then in turn on consumers¡¦ intention. In addition, this study also explores how the consumers¡¦ price sensitivity mediate the impact of price reduction frequency on consumers¡¦ perceived value and perceived transaction utility. A field experiment was done first. Then, an online experiment was designed and implemented based on the observation of the field experiment. The research result indicates that price reduction frequency will positively affect the consumers¡¦ perceived value and perceived transaction utility. Further, both consumers¡¦ perceived value and perceived transaction utility will affect the consumers¡¦ intention. In addition, the consumers¡¦ price sensitivity modulates the impact of price reduction frequency on consumers¡¦ perceived value and perceived transaction utility. Finally, the observations of field experiment and lab experiment demonstrate the phenomena of demand externalities, price-drop effect, and cycle ending effect proposed by previous researches.

Group buying is one dynamic pricing application and it is a mechanism permitting consumers to gather bargaining power in order to get a volume discount or other premiums. In group-buying, the price depends on the number of collected orders. Given a price curve shows the existing orders and current price, the consumer will have some expectation of value and uncertainty for future price. Previous literatures found both the positive participation externality effect and price-drop effect from the field data (Kauffman and Wang, 2001; 2002). Because there are no variable controls from the field study, we can not really know what reasons cause these phenomena in group-buying. Thus, this study will use experimental methodology to the existence of these two effects and understand why they happen. The purpose of this research is to investigate whether positive participation externality effect and price-drop effect exists in group-buying and to explore whether the two effects are related to consumers¡¦ perceived risk and perceived value, whether the intention to join group-buying is influenced by perceived risk and perceived value. The study shows that the two effects really happen in group-buying. Participation externality effect is caused by financial risk, time risk and perceived value. However, price-drop effect is generated from financial risk. Additionally, consumers have higher intentions to join group-buying when they perceive lower financial risk and more perceived value.