Groublogpon – The Serious Blog of Groupon

Evan Miller, economics Ph.D. student at the University of Chicago, takes a look at the economics behind Groupon in his article, Golden Footballs and the Economics of Groupon. He explores why Groupon is a win for businesses, calling it “a profound economic innovation:”

Groupon, or a commitment mechanism like it, has something to offer any business that sells a unique product above the cost of production: that is, businesses that are monopolists, or price-setters. So far Groupon has proven suitable to small businesses that offer one-of-a-kind services (for example, a downtown restaurant), but the economics hold for large businesses selling patented or highly branded products. All that is needed is a simple trade with a group of customers: a lower unit price in exchange for an agreement to buy a larger quantity than they would actually like to have at that unit price. Like the best economics, the golden football is a simple idea—but a powerful one.

Read the rest of the article here.