@kalikingz
Price discrimination requires that consumers can be separated according to elasticity of demand, the firm must be able to prevent resale of the product, and there no cost difference for the product that would explain the different price.
Coupons represent what one might at least call quasi-price discrimination. It is a form of what is known as “third-degree price discrimination.”
The use of coupons is similar in some respects to the “senior discount” in that it is designed to attract the low-end customer who is more price-conscious and is likely to have a more flexible time schedule.
Coupons are available to all (most generally to anyone who subscribes to a newspaper). However, given the opportunity cost of their time, most middle-to-upper income individuals do not avail themselves of an opportunity to “clip the coupons.” Thus, it is the individuals from the lower-income households who, on the average, get the benefit of the coupons.
Department store vs. discount store:
The operative issue here relates to “when those price differences are not justified by cost differences.” The business model of the discount store is to be a low cost (relative to the department store) provider of merchandise. One of the key differences in cost drivers between the two types of stores is the “level of service” that is provided.
The department store charges higher prices due to their higher cost structure. This is independent of the basic “cost of the merchandise” itself which may, or may not, be the same for the two types of stores depending on the various firms' bargaining power with suppliers.
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