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Promoting sales through coupns in oligopoly under imperfect price information

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  • Moraga, José Luis
  • Petrakis, Emmanuel

Abstract

This paper analyzes sales promotions through coupons in an oligopoly under imperfect price infonnation. Firms can send out coupons that either communicate the price (CCPs) or not (CNCPs). By offering rebates or advertising their prices at distant locations, firms can attract consumers from their rivals' markets. A unique symmetric pure strategy equilibrium is shown to exist where sellers do send out coupons that offer positive rebates. Thus, contrary to the literature, sales promotions are pennanent. In the equilibrium with CNCPs, prices, advertising efforts and finns' profits are higher than in the equilibrium with CCPs. However, the equilibrium with CNCPs is not robust if we allow firms to choose the type of coupons as well. In contrast, the equilibrium with CCPs is always robust.

Suggested Citation

  • Moraga, José Luis & Petrakis, Emmanuel, 1997. "Promoting sales through coupns in oligopoly under imperfect price information," UC3M Working papers. Economics 6039, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:6039
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    References listed on IDEAS

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    1. Bester, Helmut & Petrakis, Emmanuel, 1995. "Price competition and advertising in oligopoly," European Economic Review, Elsevier, vol. 39(6), pages 1075-1088, June.
    2. Bester, Helmut & Petrakis, Emmanuel, 1996. "Coupons and oligopolistic price discrimination," International Journal of Industrial Organization, Elsevier, vol. 14(2), pages 227-242.
    3. Gerard R. Butters, 1977. "Equilibrium Distributions of Sales and Advertising Prices," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 465-491.
    4. Caminal, Ramon & Matutes, Carmen, 1990. "Endogenous switching costs in a duopoly model," International Journal of Industrial Organization, Elsevier, vol. 8(3), pages 353-373, September.
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    Coupons;

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