Modelling of Online Group Discounts

Web pages for group discounts have become very popular in the past few years. In this paper we concentrate on the group discounts for the service industry in which a quality of the service plays an important role in retaining customers which in return affects business profitability. We present a model of the group discount offer from a merchant’s point view. A merchant decides about the size of the discount offered, having in mind quality of the service offered which is affected by the number of customers who use the service. Finally, we derive the first order optimality conditions.