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Can coupons counteract strategic consumer behavior?

Author

Listed:
  • Dror Hermel

    (University of Toronto)

  • Benny Mantin

    (Economics and Finance University of Luxembourg)

  • Yossi Aviv

    (Tel Aviv University)

Abstract

In multi-period environments, the presence of strategic consumers induces monopolist retailers to inter-temporally compete with themselves. Targeting consumers with price-discount coupons is a proposed mechanism to overcome this inter-temporal competition. Targeting consumers with coupons can counteract strategic consumer behavior, but this mechanism cannot completely eradicate the negative implications imposed by the presence of such consumers. Additionally, the quality of information available (regarding the consumers’ valuations) may play an important role in the targeting decisions. Specifically, we illustrate how the retailer may absent completely from targeting efforts when the quality of information and the proportion of strategic consumers are sufficiently low. Lastly, we consider the optimal investment in information solicitation, demonstrating the trade-off between a low investment, which result in low quality of targeting capability, and a high investment which improves the effectiveness of the targeting efforts.

Suggested Citation

  • Dror Hermel & Benny Mantin & Yossi Aviv, 2022. "Can coupons counteract strategic consumer behavior?," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(3), pages 262-273, June.
    • Handle: RePEc:pal:jorapm:v:21:y:2022:i:3:d:10.1057_s41272-021-00325-y
    DOI: 10.1057/s41272-021-00325-y
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