Deriving an Optimal Restaurant Coupon Discount Rate: Evidence and Discussion

Abstract

The model of third-degree price discrimination was used to derive the optimal coupon discount rate. Results showed that the optimal discount rate is related to the price elasticity of demand for restaurant sales in the market that do not involve coupons (the first market) and in the market with coupons (the second market). In light of the theoretical and data evidence, we also found that the price elasticity of demand for restaurant sales in both markets (with and without coupons) is elastic, and greater in the second market (with coupons) than in the first market (without coupons).