English
 
Help Privacy Policy Disclaimer
  Advanced SearchBrowse

Item

ITEM ACTIONSEXPORT

Released

Paper

Sticky Rebates: Target Rebates Induce Non-Rational Loyalty in Consumers

MPS-Authors
/persons/resource/persons183174

Morell,  Alexander
Max Planck Institute for Research on Collective Goods, Max Planck Society;

/persons/resource/persons183120

Glöckner,  Andreas
Max Planck Institute for Research on Collective Goods, Max Planck Society;

/persons/resource/persons183214

Towfigh,  Emanuel Vahid
Max Planck Institute for Research on Collective Goods, Max Planck Society;

Fulltext (restricted access)
There are currently no full texts shared for your IP range.
Fulltext (public)
There are no public fulltexts stored in PuRe
Supplementary Material (public)
There is no public supplementary material available
Citation

Morell, A., Glöckner, A., & Towfigh, E. V. (2009). Sticky Rebates: Target Rebates Induce Non-Rational Loyalty in Consumers.


Cite as: https://hdl.handle.net/11858/00-001M-0000-0028-6F4C-E
Abstract
Competition policy often relies on the assumption of a rational consumer, although other models may better account for people’s decision behavior. In three experiments, we investigate the influence of loyalty rebates on consumers based on the alternative Cumulative Prospect Theory (CPT), both theoretically and experimentally. CPT predicts that loyalty rebates could harm consumers by impeding rational switching from an incumbent to an outside option (e.g., a market entrant). In a repeated trading task, participants decided whether or not to enter a loyalty rebate scheme and to continue buying within that scheme. Meeting the condition triggering the rebate was uncertain. Loyalty rebates considerably reduced the likelihood that participants switched to a higher-payoff outside option later. We conclude that loyalty rebates may inflict substantial harm on consumers and may have an underestimated potential to foreclose consumer markets.