The Determinants of Coupon Discounts for Breakfast Cereals

29 Pages Posted: 23 Aug 2008

See all articles by Gregory Price

Gregory Price

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)

John M. Connor

Purdue University; American Antitrust Institute (AAI)

Date Written: July 30, 2002

Abstract

This study identifies the determinants of coupon values at the brand level within the context of a complex marketing program. A two-equation, fixed-effects, panel-data model accounts for the bidirectional causality between brand prices and discount levels. The empirical model is fitted with data on household purchases of ready-to-eat (RTE) breakfast cereals and captures the industry's 1996 price cuts and discount reductions. Higher brand prices cause coupon values to rise, supporting the price discrimination hypothesis. Coupon values fall with in-store displays and more intense advertising but rise when couponed products are featured in store flyers. Discount levels are positively related to brand market share and the size of discounts redeemed for rival cereals. Coupon values fall with increasing brand loyalty among RTE cereal purchasers. Cereal prices are positively affected by coupon values, advertising expenditures, input costs, and the prices of competing brands. Inventory levels are negatively correlated with brand price.

Keywords: brand, cereal, marketing, price discrimination, prices

JEL Classification: Q13, Q11, L11, M31

Suggested Citation

Price, Gregory and Connor, John M. and Connor, John M., The Determinants of Coupon Discounts for Breakfast Cereals (July 30, 2002). Available at SSRN: https://ssrn.com/abstract=1242202 or http://dx.doi.org/10.2139/ssrn.1242202

Gregory Price

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS) ( email )

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John M. Connor (Contact Author)

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