Thesis
Essays on the loyalty penalty : impacts on consumers and policy responses
- Creator
- Rights statement
- Awarding institution
- University of Strathclyde
- Date of award
- 2025
- Thesis identifier
- T17344
- Person Identifier (Local)
- 202093509
- Qualification Level
- Qualification Name
- Department, School or Faculty
- Abstract
- This thesis investigates the loyalty penalty, its impact on consumers, and potential policy responses across four chapters. It also contributes to ongoing debates between policymakers and businesses regarding the loyalty penalty. In the introductory chapter, I provide an overview of the regulatory and academic literature and the general concepts used in this thesis to investigate the loyalty penalty. The second chapter presents a theoretical model to explain the loyalty penalty. I use a classic framework that distinguishes between shoppers and non-shoppers, extending it to two periods. In each period, two firms compete on price. In the first period, firms set a base price, which remains constant across both periods, and in the second period, they set a renewal price. A consumer who ends up paying the renewal price in the second period is subject to the loyalty penalty. The difference between the renewal and base prices demonstrates how the loyalty penalty can arise from low consumer engagement, leading to its persistence in equilibrium. In the third chapter, I analyse a duopoly with three types of consumers. Using a framework which distinguishes between savvy shoppers, average consumers, and vulnerable consumers, I assess the effects of the loyalty penalty on these groups, particularly vulnerable consumers, and explore how firms adjust their pricing decisions based on the presence of various consumer types in the market. Additionally, this chapter contributes to the discussion among policymakers on understanding and defining consumer vulnerability. The final chapter examines the policy responses implemented by regulators, including Ofcom, Ofgem, and the FCA, to mitigate the loyalty penalty through the lens of the models developed in Chapter 2 and Chapter 3. These policies include banning the loyalty penalty, imposing price caps, introducing social tariffs, and promoting educational initiatives. The chapter evaluates these policies and concludes that some policy responses can have unintended consequences. It argues that acts designed to protect consumers often undermine market competitiveness, highlighting the need for careful policy design.
- Advisor / supervisor
- Fongoni, Marco
- Dickson, Alex, 1979-
- Comerford, David
- Resource Type
- DOI
Beziehungen
Objekte
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PDF of thesis T17344 | 2025-07-04 | Öffentlich | Herunterladen |