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Consumer uncertainty and price discrimination through online coupons: an empirical study of restaurants in Shanghai

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  • Zhang, Jie
  • Savage, Scott
  • Chen, Yongmin

Abstract

We use data from restaurants in Shanghai, China to conduct a new empirical analysis of prices and coupons. Our results show a positive relationship between prices and online coupons. Moreover, the price premium from couponing is higher for restaurants about which consumer values appear to be more uncertain. When consumer uncertainty is high, restaurants that offer coupons have an average price that is about 60 percent higher than similar restaurants that do not issue coupons. When uncertainty is low, restaurants that offer coupons have an average price that is about ten percent higher. These findings are consistent with online couponing in the restaurant industry being used for price discrimination and as a promotional device in the presence of higher uncertainty in consumer valuations.

Suggested Citation

  • 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.
  • Handle: RePEc:pra:mprapa:34583
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    References listed on IDEAS

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    1. Kenneth S. Corts, 1998. "Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 306-323, Summer.
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    More about this item

    Keywords

    consumer uncertainty; coupons; price discrimination; price promotion;

    JEL classification:

    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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