Coupons and price discrimination

Coupons are a promotional and promotion tactic used by businesses to sell lower discounts to customers who would otherwise buy a competitor’s goods. Customers are discriminated against and not all customers who get vouchers would take the time to claim the savings (Murphy, 2011). The voucher is usually in the form of a paper or a ticket that may be used to obtain a financial discount or a refund while purchasing a commodity (Graham, 2013).

During the Christmas season, I went to a Walmart in New York and bought groceries. Later on, I got an email with a coupon which I downloaded and printed at home. I was given the coupon after complaining about the increased price of commodities, and I had made it clear to them that the rates will prevent me from purchasing their products in the future. There was another store located close to Walmart which offered slightly lower prices, and I would have gone to that store. However, I had already spent a lot of time and energy searching for appropriate products at the Walmart store, and I would lose precious time if I decided to go to the other store. Also, the coupon given by the retail store would reduce the overall price of the purchased products. Therefore, the benefits of choosing an alternative store could not match those offered by Walmart (Landes, 2012).

The coupon was in the form of a small document that had a barcode and a unique identification number. Also, it had a value of 100 dollars which was the equivalent amount of money that I would be refunded back. The document was valid for one week, and it could only be used at the store where I purchased the commodities. I waited for two days and decided to cash in on the coupon where I went to the store and purchased products worth $520, but I paid $420 less the coupon amount.

Description of a time when I ignored a coupon

In another case, I forgot to purchase some household products, and I had already left the city. I was aware of the coupons issued at the Walmart stores in the city, but I decided to continue with my journey home where I knew there was another store that sold the same products but at slightly higher prices that did not have an impact on the overall cost. The idea of heading back to the city just to get a coupon was a waste of fuel, time and effort. Also, I had other plans in my schedule.

Is price discrimination fair?

It is not fair to offer different prices to people who buy similar products because it is against the spirit of equality among people. Also, the coupons provide a loophole that enables retail outlets to gradually increase the price of their goods and services over an extended period which leads to increased cost of living (Edward, Johnson, & Tellis, 2013). Therefore, the firm continues to make abnormal profits while consumers struggle to make ends meet (Meng Su, Sun, & Zheng, 2014). I think the government should put laws to regulate the issuing of coupons to level the playing field for consumers, manufacturers, and retailers.

Conclusion

Price discrimination is a survival tool used by firms to gain and maintain access to the market. However, the consumer should be protected from the price manipulation in the form of coupons which are disguised as price discounts when in reality they are a source of future economic problems.

References

Edward, H., Johnson, J., & Tellis, G. J. (2013). To Whom, When, and How Much to Discount? A Constrained Optimization of Customized Temporal Discounts. Journal of Retailing, 361-373.

Graham, R. J. (2013). How to Use Coupons for Price Discrimination in Managerial Economics. Retrieved from Dummies: http://www.dummies.com/education/economics/how-to-use-coupons-for-price-discrimination-in-managerial-economics/

Landes, H. (2012, August 211). Individualized Coupons Aid Price Discrimination. Retrieved from Forbes: https://www.forbes.com/sites/moneybuilder/2012/08/21/individualized-coupons-aid-price-discrimination/#6487dfc145e7

Meng Su, Sun, L., & Zheng, X. (2014). Coupon Trading and its Impacts on Consumer Purchase and Firm Profits. Journal of Retailing, 40-61.

Murphy, R. P. (2011, January 8). The Economics of Coupons and Other Price Cuts. Retrieved from Mises Institute: https://mises.org/library/economics-coupons-and-other-price-cuts