How do customer loyalty programs create switching costs? We estimate the demand effects of tier levels within a frequent flier program by exploiting discrete tier thresholds. We have two main results. First, members increase demand to reach a higher tier level just before the end of the calendar...

We introduce a game-theoretic model with switching costs and endogenous references. An agent endogenizes his reference strategy and then, taking switching costs into account, he selects a strategy from which there is no profitable deviation. We axiomatically characterize this selection procedure...