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Clipping Coupons: Redemption of Offers with Forward-Looking Consumers

Author

Listed:
  • Joseph Kissan

    (School of Business, University of Kansas)

  • Oksana Loginova

    (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.

Suggested Citation

  • Joseph Kissan & Oksana Loginova, 2018. "Clipping Coupons: Redemption of Offers with Forward-Looking Consumers," Working Papers 1810, Department of Economics, University of Missouri.
    • Handle: RePEc:umc:wpaper:1810
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    References listed on IDEAS

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    1. Ted O'Donoghue & Matthew Rabin, 1999. "Incentives for Procrastinators," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 769-816.
    2. Keller, Kevin Lane, 1987. "Memory Factors in Advertising: The Effect of Advertising Retrieval Cues on Brand Evaluations," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 14(3), pages 316-333, December.
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    More about this item

    Keywords

    consumer redemption behavior; forward-looking consumers; forgetting; stochastic costs;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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