Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Thursday, February 25, 2010

Retailer Choice and Loyalty Schemes - Evidence from Sweden

Posted by D. Daniel Sokol

Johan  Lundberg (Department of Economics, Umeå University) and and Sofia Lundberg, (Department of Economics, Umeå University) have some interesting data on Retailer Choice and Loyalty Schemes - Evidence from Sweden.

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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