Cost, Quality and Capacity Considerations in Group-Buying of Training Services

Cost, Quality and Capacity Considerations in Group-Buying of Training Services

  This paper examines the practice of group-buying of educational services, known as consortium training. A theoretical and historical overview of group-buying is presented within the context of quantity discounts and network organization. A formal model is developed, adopting alternative cost components such as variable cost per trainee, fixed cost per trainee, and cost of poor quality in training. In traditional group-buying, the primary goal is to maximize the number of participating companies in order to gain economies of scale. Consortium training, however, limits the number of participants due to the inverse relationship between training quality and the number of trainees. Using the proposed model, a consortium or a company can 1) identify the optimum number of companies to join the consortium training program and 2) objectively measure the economic benefits of consortium training.