Behavioral Antitrust and Merger Control

Werden, Gregory J.; Froeb, Luke M.; Shor, Mikhael

doi:10.1628/093245611794656426

Cited by 11 publications

(1 citation statement)

References 32 publications

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“…Further subjects of study were behavioral merger control (Stucke 2007;Reeves & Stucke 2011) and behavioral market entry (Tor 2002). This new direction of research received a lot of attention and support (see, e.g., a special issue of Competition Policy International in 2010; the conference web site http://behavioralantitrust.acle.nl; the speech by Federal Trade Commissioner Rosch, 2010), but it was also criticized for making welfare analysis impossible, for applying insights derived from a student subject pool to firm behavior, and for pursuing a paternalistic agenda (Werden, Froeb, & Shor 2011).…”

Section: Introductionmentioning

confidence: 99%

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

2010

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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.

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Section: Introductionmentioning

confidence: 99%