Promoting sales through coupns in oligopoly under imperfect price information
AbstractThis 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.
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Sales promotions; Coupons; Oligopoly; Imperfect information; Price discrimination;
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