Why coupons exist — and it's not to save you money

A store could just lower its price for everyone. Instead it prints coupons, offers student and senior discounts, and charges wildly different airfares for identical seats. This is price discrimination: selling the same thing at different prices to different buyers to capture more total revenue. The goal isn't generosity — it's sorting.

The trick works because buyers differ in willingness to pay. A busy professional will pay full price without blinking; a bargain-hunter will only buy if it's cheaper. A single price forces a choice: set it high and lose the price-sensitive crowd, or set it low and leave money on the table with everyone else. Coupons solve this by making the discount effortful — clipping, entering codes, buying in bulk. The people willing to jump through hoops reveal themselves as the price-sensitive ones, so the seller can quietly charge them less while everyone else pays more.

This is why the same flight costs more when booked last-minute (business travelers, low sensitivity) and less months ahead (vacationers, high sensitivity). The hurdle — advance planning, a coupon code, a student ID — is a filter that sorts customers into groups by how much they'll pay.

Counterintuitively, price discrimination often expands access: it lets sellers profitably serve budget buyers they'd otherwise ignore, while extracting more from those who can pay. Whether that's good or bad depends on which side of the coupon you're on.