TITLE:
The Impact of Restaurant Coupon Removal on Diners’ Consumption Behavior: A Theoretical Analysis
AUTHORS:
Tin-Chun Lin
KEYWORDS:
Coupons, Demotion Cost, Price Elasticity of Demand, Consumer Behavior
JOURNAL NAME:
Theoretical Economics Letters,
Vol.9 No.1,
January
10,
2019
ABSTRACT: We
investigated how customers respond when a restaurant stops issuing coupons after making them available
to customers for a period of time. Our theoretical analysis suggests that this
practice will decrease customers’ consumption demand and utility to a level even lower
than the pre-coupon level. Customers who used the coupons and enjoyed the lower
prices would suddenly feel less appreciated by a restaurant that stops issuing
coupons. A demotion cost would result in a lower operating budget and a
decrease in customers—to levels even lower than pre-coupon levels. Our theoretical analysis
suggests that customers will be more sensitive to
price increases due to the absence of coupons, rendering customer demand more
elastic and the demand curve flatter.