The optimal face value of a discount coupon

Uri Ben-Zion, Aharon Hibshoosh, Uriel Spiegel

Research output: Contribution to journalArticlepeer-review

7 Scopus citations


The paper analyzes the decision made by firms to issue one-time coupons as a means of attracting new deal-prone customers. Given the structure of the market and the share of loyal customers, we derive boundaries for the value of the coupon, as well as the optimal face value of the coupon. The main variables which determine the coupon value are: the size of deal-prone and loyal market segments, the initial profit margin and the coupon's processing cost. We show that the optimal share of discount out of the profit margin per customer should never exceed the customer share of the deal-prone segment.

Original languageEnglish
Pages (from-to)159-174
Number of pages16
JournalJournal of Economics and Business
Issue number2
StatePublished - 1 Jan 1999
Externally publishedYes


  • Coupon face value
  • Deal prone customers
  • Loyal customers
  • Price discrimination

ASJC Scopus subject areas

  • Business, Management and Accounting (all)
  • Economics and Econometrics


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