Clipping Coupons: Redemption of Offers with Forward-Looking Consumers

Joseph Kissan () and Oksana Loginova ()
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Joseph Kissan: School of Business, University of Kansas

No 1810, Working Papers from Department of Economics, University of Missouri

Abstract: Consumer redemption behavior pertaining to coupons, gift certificates, product sampling, rebates, and the like, has been the focus of much scholarly inquiry and the extant literature has documented two noteworthy empirical regularities - a bump in redemptions close to offer expiry and greater redemption with shorter redemption windows. In the extant work, these phenomena have been explained by invoking myopic consumers. Against this backdrop, we ask a simple question: can these phenomena survive if we assume rational, forward-looking consumers? Accordingly, we develop a model consisting exclusively of forward-looking consumers and incorporate two constructs highlighted in the literature - forgetting and stochastic redemption costs. We derive consumers' period-by-period redemption rule and subsequently illustrate the emergence of the two aforementioned empirical regularities.

Keywords: consumer redemption behavior; forward-looking consumers; forgetting; stochastic costs (search for similar items in EconPapers)
JEL-codes: D11 D81 D91 (search for similar items in EconPapers)
Pages: 9 pgs.
Date: 2018-06-22
New Economics Papers: this item is included in nep-mkt
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Journal Article: Clipping Coupons: Redemption of Offers with Forward-Looking Consumers (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:umc:wpaper:1810

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