The Impact of Restaurant Coupon Removal on Diners’ Consumption Behavior: A Theoretical Analysis - Theoretical Economics Letters

TEL > Vol.9 No.1, February 2019

The Impact of Restaurant Coupon Removal on Diners’ Consumption Behavior: A Theoretical Analysis ()

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DOI: 10.4236/tel.2019.91002 4,373 Downloads 7,445 Views Citations

Author(s)

Tin-Chun Lin

Affiliation(s)

School of Business and Economics, Indiana University, Bloomington, USA.

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.

KEYWORDS

Coupons, Demotion Cost, Price Elasticity of Demand, Consumer Behavior

Share and Cite:

Lin, T. (2019) The Impact of Restaurant Coupon Removal on Diners’ Consumption Behavior: A Theoretical Analysis. Theoretical Economics Letters, 9, 9-20. doi: 10.4236/tel.2019.91002.

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