“Quick Response” Economic Stimulus: The Effect of Small-Value Digital Coupons on Spending

We study a new consumption stimulus program implemented by a large Chinese city that leverages mobile payment platforms to dispense massive amounts of small-value digital coupons. Exploiting a “rush” design of the dispensing process in which over 1 million program participants compete for coupons on a first-come, first-served basis through a digital portal, we estimate that winning coupons increases weekly out-of-pocket spending by US$3 for every US$1 in government subsidy. Coupon-winning consumers practice inter-temporal substitution by moving up purchases that would have been made four months in the future. Customer flow analysis suggests that coupons distort consumption toward pricier options. (JEL D15, E21, E42, H71, O18, P25, P36)