Assessing the Economic Impact of Restaurant Coupon Removal on Diners’ Consumption Behavior: A Theoretical Analysis

In This chapter, I investigated how customers respond when a restaurant stops issuing coupons after
making them available to customers for a period of time. Coupon distribution can increase business
sales and save customers money. As a result, my theoretical analysis suggests that this practice
would decrease customers’ consumption demand and utility to a level even lower than the pre-coupon
level. Customers’ intention to revisit the same restaurant was frustrated by the experience of coupon
denial. More importantly, customers who used the coupons and enjoyed the lower prices would
suddenly feel less appreciated by a restaurant that stops issuing coupons. For that reason, a
demotion cost would result in a lower operating budget and a decrease in customers—to levels even
lower than pre-coupon levels. As a consequence, my theoretical analysis suggests that customers
would be more sensitive to price increases due to the absence of coupons, which is rendering
customer demand more elastic and the demand curve, that is, the demand curve would become
flatter.