Comment by gojomo | Hacker News Reader

Comment by gojomo | Hacker News Reader

I found this analysis (previously posted to HN) a bit more rigorous and less ideological:

http://www.evanmiller.org/golden-football.html

The mechanism has some superficial similarity to 'Assurance Contracts', an economic idea for coordinating group actions that are best done all-or-nothing. However, it seems that at least now, with Groupon in its galloping stride, there's no real doubt most promotions will hit their target participation level. That is, it's more a promotional mechanism for focusing consumer attention, rather than a solution for a coordinated-decisionmaking problem.

There's room for other innovations in these areas, as well. The 'dominant assurance contract' gives an extra sweetener back to pledgers if the threshold isn't met, to make assurance contracts work for otherwise nonexcludable 'public' goods where bystanders might normally hope to free-ride after others fund. See:

http://www.marginalrevolution.com/marginalrevolution/2005/05...

http://en.wikipedia.org/wiki/Assurance_contract

Agreed, the Evan Miller piece is far more thoughtful than the OP. Still, it doesn't consider that many groupon deals are un-, not barely-, profitable for the business owner.

For example: http://posiescafe.com/wp/?p=316 The deal was $6 for $13 worth of merchandise, but after Groupon's take, she gets to keep $3. No way to cover costs with a deal like that.. never mind profit.

And if the deal is unprofitable, there's no way to economically justify the offering unless you start factoring in soft effects like return visiters, name recognition, etc.

Indeed, there must be other effects, perhaps more important than the 'golden football' zone, that explain these loss-leader deals.

Almost any business should be willing to lose a little on product if that loss displaces more in other promotion/customer-acquisition costs. A business would be more willing to do so if they're sure the cost is reaching new customers. Perhaps that's an important part of the Groupon secret sauce -- the purchase of the 'coupon' with credit cards that provide a relatively strong identity signal. That could be used -- eventually, at least -- to target future promotions to unique new customers.

Does anyone know what sort of data the business gets from Groupon? Have any businesses offered repeat Groupons that aren't available to people who bought the first one?

> Does anyone know what sort of data the business gets from Groupon?

The only customer data Groupon shares with the merchant is first and last name.

> Have any businesses offered repeat Groupons that aren't available to people who bought the first one?

Highly unlikely. Imposing a conditional like that would complicate Groupon's process and confuse many users.

You mentioned identification by credit card number... Problems I see in that scenario: PCI compliance, UX, lower revenue per deal. And since many people have more than one credit card there is a loophole.

Yeah, the article was a bit disappointing. It ended up being a biased advertisement for Austrian economics, the most fantastic of them all.

Anything from mises.org is pretty much going to be a partisan piece trying to sell you on their point of view. That doesn't mean it's necessarily wrong, just not a place that's ever going to contradict itself or point to evidence that they don't hold all the answers.

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