by Mark Thoma, University of Oregon (Department of Economics)

Visit Economist's View

Loyalty Cards and Polymorphic Equilibria

Posted on May 16, 2008

Tyler Cowen: Retail loyalty card programs, by Tyler Cowen: From some time ago, Kevin Drum reports: I really loathe retail loyalty card programs. These programs serve two functions. First, they are a form of price discrimination. Buyers who are willing to collect and show the cards pay lower prices while the I can't be bothered with this **** types pay higher prices. Second, retail loyalty cards enforce partial collusion ex post in an oligopolistic setting. In other words, cards and frequent flyer programs lock in buyers to their favored firms. Once that lock-in is accomplished, a...

Original article link


inflation