Department of Mathematics
York College (CUNY)
Jamaica, New York 11451
New York, New York 10027
Some large chains of stores (e.g. stores that sell office supplies or drug stores) offer customers incentives to come to their stores in the form of "rewards" coupons. Typically, a discount of x% or $y is offered on a purchase of $z. The coupon is usually good only for a few days - thus one might be offered a reward coupon of $6 on a purchase of $30 or more, where the customer is informed of this opportunity on a Thursday, and the coupon is valid through the end of the upcoming Sunday.
Construct a model to advise a chain of this kind which investigates the pros and cons of percentage offers versus fixed size reward coupons with the goal of maximizing profit.
How does maximizing profit differ from maximizing revenue? Why might a chain prefer to optimize revenue rather than profit?
What data might you ask the chain to provide you with in order to construct your model?
What do you think are the most important "parameters" in your model?