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The Deadweight Loss Of Coupon Remedies For Price Overcharges

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  • A. MITCHELL POLINSKY
  • DANIEL L. RUBINFELD

Abstract

Consumers injured by price overcharges often are awarded coupons that can be used for a limited period of time to purchase the good at a price below that which prevails after the overcharge has been eliminated. Coupon remedies cause a deadweight loss by inducing excessive consumption by consumers with relatively low demand during the remedy period. The magnitude of the loss can be comparable to that caused by the price overcharge. As demand variability goes to zero, the deadweight loss from coupon remedies goes to zero. Eliminating the expiration date for the use of coupons does not eliminate the loss.

Suggested Citation

  • A. Mitchell Polinsky & Daniel L. Rubinfeld, 2008. "The Deadweight Loss Of Coupon Remedies For Price Overcharges," Journal of Industrial Economics, Wiley Blackwell, vol. 56(2), pages 402-417, June.
    • Handle: RePEc:bla:jindec:v:56:y:2008:i:2:p:402-417
    DOI: 10.1111/j.1467-6451.2008.00346.x
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    References listed on IDEAS

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    1. A. Mitchell Polinsky & Daniel L. Rubinfeld, 2005. "A Damage-Revelation Rationale for Coupon Remedies," Discussion Papers 04-009, Stanford Institute for Economic Policy Research.
    2. Borenstein, Severin, 1996. "Settling for Coupons: Discount Contracts as Compensation and Punishment in Antitrust Lawsuits," Journal of Law and Economics, University of Chicago Press, vol. 39(2), pages 379-404, October.
    3. Richard Gilbert & Carl Shapiro, 1990. "Optimal Patent Length and Breadth," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 106-112, Spring.
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    1. A. Mitchell Polinsky & Daniel L. Rubinfeld, 2005. "A Damage-Revelation Rationale for Coupon Remedies," Discussion Papers 04-009, Stanford Institute for Economic Policy Research.

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