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

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 w ill 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 w ill be more sensitive to price increases due to the absence of coupons, rendering customer demand more elastic and the demand curve flatter.