Thursday, September 16, 2010

Coupons

Price discrimination (or group pricing or variable pricing) is an old mechanism for firms to sell their products to different customers at different prices so that the firm can increase it's overall profits. It comes in many forms, and one of those is the coupon. Coupons are redeemable at retail outlets, in which the customer buys a product and gives the retailer a coupon, upon which the retailer reduces the price by the amount of the coupon.

During the last recession, there was an increase in the use of coupons as mentioned in this article. Thus as consumers opportunity cost of time decreases, some will choose to clip coupons to reduce their overall bill, and some will not. Thus those who do are sorted into one group and those who do not are sorted into another group.

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