We investigate whether and how targeted rebates impede rational switching of consumers from an incumbent to an outside option (e.g., market entrant). In a real trading problem, participants repeatedly buy tokens and can enter a target rebate scheme. Buying in a rebate scheme considerably reduces...

We investigate whether and how targeted rebates impede rational switching of consumers from an incumbent to an outside option (e.g., market entrant). In a real trading problem, participants repeatedly buy tokens and can enter a target rebate scheme. Buying in a rebate scheme considerably reduces...

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...