The Competitive Effects of Loyalty Discounts in a Model of Competition Implied by the Discount Attribution Test

The Competitive Effects of Loyalty Discounts in a Model of Competition Implied by the Discount Attribution Test

Sean Durkin
Antitrust & Competition

In this article in Antitrust Law Journal, Sean Durkin shows that the discount attribution test provides a simple, intuitive way to illustrate the procompetitive benefits of loyalty discounts. Using a model of competition implied by the discount attribution test, the article shows how competition can increase when sellers can offer loyalty discounts relative to a situation where they can only offer a single, unconditional price. The results of the model also highlight the flaws in claims often made by plaintiffs and their experts regarding the competitive effects of loyalty discounts.

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