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Why Do Manufacturers Issue Coupons? An Empirical Analysis of Breakfast Cereals

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  • Aviv Nevo
  • Catherine Wolfram

Abstract

We explore the relationship between shelf prices and manufacturers' coupons for 25 ready-to-eat breakfast cereals. We find that shelf prices are lower during periods when coupons are available. This result is inconsistent with static monopoly price discrimination under a broad range of assumptions. We present evidence that is inconsistent with both dynamic theories of price discrimination and explanations of couponing based on the vertical relationship between manufacturers and retailers. We find support for models of price discrimination in oligopoly settings as well as suggestions that firmwide incentives may induce managers to use coupons and price cuts simultaneously. Finally, lagged coupons have a positive effect on current sales, suggesting that coupons are used to induce repurchase.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 33 (2002)
Issue (Month): 2 (Summer)
Pages: 319-339

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Handle: RePEc:rje:randje:v:33:y:2002:i:summer:p:319-339

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Cited by:
  1. Meghan Busse & Jorge Silva-Risso & Florian Zettelmeyer, 2006. "$1,000 Cash Back: The Pass-Through of Auto Manufacturer Promotions," American Economic Review, American Economic Association, American Economic Association, vol. 96(4), pages 1253-1270, September.
  2. Courty, Pascal & Pagliero, Mario, 2009. "The Impact of Price Discrimination on Revenue: Evidence from the Concert Industry," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7120, C.E.P.R. Discussion Papers.
  3. Englmaier, Florian & Gratz, Linda & Reisinger, Markus, 2012. "Price Discrimination and Fairness Concerns," Discussion Papers in Economics, University of Munich, Department of Economics 12735, University of Munich, Department of Economics.
  4. Jan Schiefer & Stefan Hirsch & Monika Hartmann & Adelina Gschwandtner, 2013. "Industry, firm, year and country effects on profitability in EU food processing," Studies in Economics, Department of Economics, University of Kent 1309, Department of Economics, University of Kent.
  5. Rennhoff, Adam D. & Serfes, Konstantinos, 2009. "Retailer price distributions and promotional activities," Economics Letters, Elsevier, Elsevier, vol. 103(2), pages 91-95, May.
  6. Hal R. Varian, 2010. "Computer Mediated Transactions," American Economic Review, American Economic Association, American Economic Association, vol. 100(2), pages 1-10, May.
  7. Stole, Lars A., 2007. "Price Discrimination and Competition," Handbook of Industrial Organization, Elsevier, Elsevier.
  8. Andrea Pozzi, 2012. "Shopping Cost and Brand Exploration in Online Grocery," American Economic Journal: Microeconomics, American Economic Association, American Economic Association, vol. 4(3), pages 96-120, August.
  9. STROUKAL Dominik, 2013. "Price Discrimination On The Marijuana Market: Schwag Or Endo?," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 8(2), pages 128-136, August.
  10. Ganesh Iyer & P.B. Seetharaman, 2003. "To Price Discriminate or Not: Product Choice and the Selection Bias Problem," Quantitative Marketing and Economics, Springer, Springer, vol. 1(2), pages 155-178, June.
  11. Kutsal Dogan & Ernan Haruvy & Ram Rao, 2010. "Who should practice price discrimination using rebates in an asymmetric duopoly?," Quantitative Marketing and Economics, Springer, Springer, vol. 8(1), pages 61-90, March.
  12. Udo Schmidt-Mohr & J. Villas-Boas, 2008. "Competitive product lines with quality constraints," Quantitative Marketing and Economics, Springer, Springer, vol. 6(1), pages 1-16, March.
  13. Zhang, Jie & Savage, Scott & Chen, Yongmin, 2011. "Consumer uncertainty and price discrimination through online coupons: an empirical study of restaurants in Shanghai," MPRA Paper 34583, University Library of Munich, Germany.

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