Attention Economy in Online Daily Deals: Demand Estimation using Structural Models

Online daily deal sites such as Groupon, which have grown explosively in recent years, allow merchants to gain the attention of online consumers and thereby increase their customer base. In this paper, we use structural models to estimate demand for a large daily deals site. We find that for a voucher with an average market share, a one per cent extension in the sale period is associated with a decrease in voucher demand by 0.22%. Moreover, a one per cent increase in the price is associated with a decrease in demand by 2.43%. Furthermore, the counter-factual experiment results show that, ceteris paribus, a one-day extension of the sale time period will decrease the product’s weekly market share by 8.9%. This suggests the presence of attention economy in online daily deals such that limited-time offers are likely to draw the consumers’ attention and consequently lead to additional sales.

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