We explore the relationship between shelf prices and manufacturers coupons for 25 ready
to eat breakfast cereals. We find that shelf prices are lower during periods when coupons are
available. This result is inconsistent with static monopoly price discrimination under a broad
range of assumptions We present evidence that is inconsistent with both dynamic theories of
price discrimination and explanations of couponing based on the vertical relationship between
manufacturers and retailers. we find support for models of price discrimination in oligopoly
settings as well as suggestions that firmwide incentives may induce managers to use coupons
and price cuts simultaneously. Finally lagged coupons have a positive effect on current sales,
suggesting that coupons are used to induce repurchase