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Retailer choice and loyalty schemes—evidence from Sweden

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  • Johan Lundberg
  • Sofia Lundberg

Abstract

From economic theory, it is known that consumer loyalty schemes can have lock-in effects resulting in entry barriers and higher prices. This paper concerns consumer loyalty schemes where the main issue is to test the hypothesis that loyalty scheme membership affects the choice of food retailer. This choice is modeled as a random utility maximization problem estimated with maximum likelihood. Based on a data set covering 1,551 Swedish households, we find evidence supporting this hypothesis. Further, according to the results, store characteristics and geographical distance matter for the choice of retailer while household characteristics are not found to have a significant effect.
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  • Johan Lundberg & Sofia Lundberg, 2010. "Retailer choice and loyalty schemes—evidence from Sweden," Letters in Spatial and Resource Sciences, Springer, vol. 3(3), pages 137-146, October.
    • Handle: RePEc:spr:lsprsc:v:3:y:2010:i:3:p:137-146
    DOI: 10.1007/s12076-010-0044-6
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    1. Cortiñas, Mónica & Elorz, Margarita & Múgica, José Miguel, 2008. "The use of loyalty-cards databases: Differences in regular price and discount sensitivity in the brand choice decision between card and non-card holders," Journal of Retailing and Consumer Services, Elsevier, vol. 15(1), pages 52-62.
    2. Joshua S. Gans & Stephen P. King, 2006. "Paying For Loyalty: Product Bundling In Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 54(1), pages 43-62, March.
    3. Fredrik Carlsson & Åsa Lofgren, 2006. "Airline choice, switching costs and frequent flyer programmes," Applied Economics, Taylor & Francis Journals, vol. 38(13), pages 1469-1475.
    4. Proussaloglou, Kimon & Koppelman, Frank S., 1999. "The choice of air carrier, flight, and fare class," Journal of Air Transport Management, Elsevier, vol. 5(4), pages 193-201.
    5. Beggs, Alan W & Klemperer, Paul, 1992. "Multi-period Competition with Switching Costs," Econometrica, Econometric Society, vol. 60(3), pages 651-666, May.
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    Cited by:

    1. Gullstrand Joakim & Jörgensen Christian, 2012. "Local Price Competition: The Case of Swedish Food Retailers," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 10(1), pages 1-27, March.

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    More about this item

    Keywords

    Bonus card; Conditional logit; Consumer choice; Distance; Food retailer; Loyalty scheme; D12; L49; L66; L81; R10;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L49 - Industrial Organization - - Antitrust Issues and Policies - - - Other
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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