Grouponomics, counterfactuals, and opportunity cost

I keep encountering the word “Groupon”–I think it’s some sort of commercial endeavor where people can buy coupons? I don’t really care, and I’ve avoided googling the word out of a general animosity toward our society’s current glorification of get-rich-quick schemes. (As you can tell, I’m still bitter about that whole stock market thing.)

Anyway, even without knowing what Groupon actually is, I enjoyed this blog by Kaiser Fung in which he tries to work out some of its economic consequences. He connects the statistical notion of counterfactuals to the concept of opportunity cost from economics. The comments are interesting too.

2 thoughts on “Grouponomics, counterfactuals, and opportunity cost

  1. I don't think that Groupon is a get rich quick scheme at all.

    What is it?

    1) Yes. People buy coupons. And they are all 50% off or better. But you pay up front for them.

    2) People subscribe to a daily email that tells them the groupon of the day. Actually, they subscribe to a city-specific list. Boston has one. New York has one. DC. Etc. (Hartford has one, but but New Haven does not. So, all of CT is on the Hartford one.)

    3) There's an iPhone app (android too?) that you can use to check them and to show them to the vendor. So, a little more tech added mean no need to carry the slip of paper.

    4) There are lots of competitors out there is the emailed daily deal space. But Groupon is the leader and the brand name. Apparently, it's mailing lists are huge.

    5) Restaurants & hair/nail/spa treats are the most common deals. Occassionally, other kinds of establishments might offer something, too.

    6) NPR's Planet Money did a piece on Groupon.

  2. I think that Groupon is in danger of becoming a generic term (you could google it :).

    It just means a coupon – the group part of groupon is to make them sound all social-networky and exciting, but that part doesn't make a difference. It's just deals, usually for small businesses to get something around half price. My understanding is that Groupon gets around half what you pay, and the business gets the other half, and in theory lots of new customers.

    In practice, it seems, the small business gets swamped with far more customers than they can handle, who get annoyed because it's too busy / sold out, and then never return.

    But it's a big thing – there are several rivals cropping up. Google tried to buy Groupon (a rumor, I think) but didn't want to stump up enough cash. Instead, Google have started their own, in Portland, OR to start with. There are lots of other rivals, like LivingSocial, which seems to have a focus on family activities, and the LA Times also has similar offers now.

    I've used it twice. Once, I bought a voucher for $30 worth of dried fruit and nuts, for $15. I still had to pay postage, and it seemed expensive. I also bought tickets for a magic show near here, for around half price. I'd been wanting to go for a couple of years, but never got around to it. Now I have to ('cos they expire in August).

    If you wanted it anyway, it seems like a good deal. Lots of them are for things like restaurants – like a $30 voucher for $15. But I feel like if I wanted to pay half price at a restaurant, I could go somewhere cheaper.

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