Part of the problem is that while non-transparent pricing may or may not be self-sustaining (Gabaix--Laibson is not wholly convincing on this point), price discrimination is unambiguously so because it serves a useful economic function, namely defraying intra-marginal costs (including fixed costs and normal profit) in the most effective and least burdensome way. Cutting coupons is a comparatively efficient way of signaling that one is a highly price-sensitive customer and should not bear a significant share of these intra-marginal costs. The JC Penney strategy was affected by a similar issue in that they got rid of most of their discount sales, which also attracted highly price-sensitive folks.
First thank you for the thoughtful response. This is more what I was hoping for when I posted... I don't agree with you signaling story but it is something I would not have considered.
"price discrimination" I don't think this is at all a story of signaling. I think it is a story of information/time costs.
My stories: If my wife picks up the circular at the store entrence and tells me that if I rip out this page an hand it to the cashier I will save a buck I do so. Most people don't do their health savings accounts or mail into NYC to have the...
Opaque fragile systems/institutions dominate.
“Out of the crooked timber of humanity no straight thing was ever made.”
All systems compete against each other for users. I believe opaque fragile systems dominate transparent robust systems. First I believe individuals choose shrouded systems more tightly bounding their rationality. Second I believe even when individuals know a system is fragile they believe they will not be victim to its fragility; the greater fools will be.
First sophisticated consumers like price discrimination while myopic consumers are ignorant they are being discriminated against or unwilling to commit the time needed to exploit the system. Information asymmetry is a feature of the system not a bug.
See “Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets” http://aida.wss.yale.edu/~shiller/behmacro/2003-11/gabaix-laibson.pdf for more detail.
Second sophisticated individuals, even when they perceive the system to be fragile, often subscribe to the the greater fool theory. They feel they will win out over the greater fools, but they do not understand how tightly bound their rationality has become due to the layers upon layers of shrouding. The myopics of course are largely ignorant of the risks.
This is a very pessimistic view that offers no solution to the problem of system fragility. I think though most solutions to fragility only create larger equally fragile systems.