The Deadweight Loss of Coupon Remedies for Price Overcharges

16 Pages Posted: 14 Jul 2008

See all articles by A. Mitchell Polinsky

A. Mitchell Polinsky

Stanford Law School; National Bureau of Economic Research (NBER)

Daniel L. Rubinfeld

University of California at Berkeley - School of Law; National Bureau of Economic Research (NBER); NYU Law School

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

Polinsky, A. Mitchell and Rubinfeld, Daniel L., The Deadweight Loss of Coupon Remedies for Price Overcharges. The Journal of Industrial Economics, Vol. 56, Issue 2, pp. 402-417, June 2008, Available at SSRN: https://ssrn.com/abstract=1158755 or http://dx.doi.org/10.1111/j.1467-6451.2008.00346.x

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Daniel L. Rubinfeld

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