  Group-buying auction has become a popular marketing strategy in the last
decade. In this paper, a stochastic model is developed for an inventory system
subjects to demands from group-buying auctions. The model discussed here takes
into the account of the costs of inventory, transportation, dispatching and
re-order as well as the penalty cost of non-successful auctions. Since a new
cycle begins whenever there is a replenishment of products, the long-run
average costs of the model can be obtained by using the renewal theory. A
closed form solution of the optimal replenishment quantity is also derived.
