Couponing as Self-Selection

A universal discount cuts revenue from everyone, including customers already willing to pay full price. A coupon creates two costs instead: money and effort. Customers who care strongly about saving money trade time and attention for the discount; customers who value convenience more skip the search and pay the posted price. That small inconvenience turns private willingness to pay into observable behaviour—a practical form of Price Discrimination without asking each buyer what they can afford.

This mechanism works only when the discount is worth pursuing for price-sensitive buyers and the full price remains acceptable to everyone else. If finding or redeeming the coupon becomes too difficult, the intended bargain hunters may abandon the purchase rather than identify themselves.