Consumer Loyalty Programs and Retail Prices: Evidence from Gasoline Markets.

This article examines the pricing strategies of gas stations in the Italian retail gasoline market that use loyalty programs, focusing on how these programs affect prices during their early and late periods. Using detailed daily price data and a difference-in-differences approach around the introduction and termination dates of loyalty programs by major oil companies ENI and Q8, the study finds that affiliated stations increase prices in the later periods of the program, exploiting consumer switching costs, while rival stations nearby also raise prices. Evidence of price reductions in early periods after program introduction is observed but is less conclusive and may be influenced by other factors. The findings suggest that loyalty programs enhance firms’ market power by generating switching costs significant enough to soften price competition, with implications for managers considering such programs and for policymakers concerned about fairness and market dynamics.