Ignoring for a moment strategic responses to the other firm's prices,it is clear that Cheerios
has no incentive to offer coupons, but Raisin Bran can profitably use coupons to try to set a lower
price for students. If Raisin Bran issues a coupon,which given our assumption is used solely by
students,Cheerios will want to lower its price to students,which will result in a lower shelf price,
and potentially a coupon,for Cheerios. If the Cheerios shelf price is lowered enough, this will
generate competition for Raisin Bran in the professor markets ,thus in turn generating a response
from Raisin Bran.In the end,both Raisin Bran and Cheerios shelf prices may be lower with
coupons