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Prices and Coupons for Breakfast Cereals

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Author Info
Aviv Nevo
Catherine Wolfram

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Abstract

This paper explores the relationship between shelf prices and manufacturers' coupons for 25 ready-to-eat breakfast cereals. Contrary to the predictions of static monopoly price discrimination, we find the shelf prices for a particular brand in a particular city are generally lower during periods when coupons are available. We find evidence that is also inconsistent with dynamic theories of pricing that predict lower prices and coupons after periods of low demand, and find little support for explanations of couponing based on the vertical relationship between manufacturers and retailers. We find some support for models of price discrimination in oligopoly settings that suggest inter-brand competition can cause all prices to be lower than the uniform (non-discriminatory) price. We also find some evidence suggesting that firm-wide incentives may induce managers to use coupons and price cuts simultaneously in order, for example, to meet market share targets.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6932.

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Date of creation: Feb 1999
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Handle: RePEc:nbr:nberwo:6932

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  1. Aviv Nevo, 2003. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Microeconomics 0303006, EconWPA. [Downloadable!]
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  2. David A. Weiskopf, 2000. "The Impact of Omitting Promotion Variables on Simulation Experiments," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 7(2), pages 159-166, July. [Downloadable!] (restricted)
  3. Price, Gregory K. & Connor, John M., 2002. "The Determinants Of Coupon Discounts For Breakfast Cereals," 2002 Annual meeting, July 28-31, Long Beach, CA 19838, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
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