Interesting analysis, but I disagree on three points: 1. This analysis implies that a business would agree to work with Groupon if their sole goal were to max

Interesting analysis, but I disagree on three points: 1. This analysis implies that a business would agree to work with Groupon if their sole goal were to maximize today's profits. That's unrealistic. 2. Many Groupons are service oriented. This analysis seems more suited to the production and sale of a physical good. Service oriented businesses have constraints as to how many customers they can serve at a given time (i.e. they generally don't scale, and if they do the quality degrades). 3. On a given transaction, there won't be increased profits for the merchant. Despite the increase in demand, Groupon is taking a 50% cut and I don't think that the demand increase can compensate for the commissions exacted by Groupon. Those are my "dummies" points. I don't have the econ. background to talk specifically about the supply/demand graphs :(