Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/91951
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dc.contributorDepartment of Logistics and Maritime Studiesen_US
dc.creatorLiu, Yen_US
dc.creatorSun, Yen_US
dc.creatorZhang, Den_US
dc.date.accessioned2022-01-26T08:00:51Z-
dc.date.available2022-01-26T08:00:51Z-
dc.identifier.issn0030-364xen_US
dc.identifier.urihttp://hdl.handle.net/10397/91951-
dc.language.isoenen_US
dc.publisherInstitute for Operations Research and the Management Sciencesen_US
dc.rights© 2021, INFORMSen_US
dc.rightsThis is the accepted manuscript of the following article:Yan Liu, Yacheng Sun, Dan Zhang (2021) An Analysis of “Buy X, Get One Free” Reward Programs. Operations Research 69(6):1823-1841, which has been published in final form at https://doi.org/10.1287/opre.2021.2128.en_US
dc.subjectCustomer reward programen_US
dc.subjectRedemption thresholden_US
dc.subjectFinite expiration termen_US
dc.subjectPurchase accelerationen_US
dc.subjectForward-looking consumeren_US
dc.subjectDynamic programmingen_US
dc.subjectTransaction utilityen_US
dc.titleAn analysis of “Buy X, Get One Free” reward programsen_US
dc.typeJournal/Magazine Articleen_US
dc.identifier.spage1823en_US
dc.identifier.epage1841en_US
dc.identifier.volume69en_US
dc.identifier.issue6en_US
dc.identifier.doi10.1287/opre.2021.2128en_US
dcterms.abstractWe study the effects of redemption hurdles on reward program members’ decision making and firm profitability. We focus on the popular “Buy X, Get One Free” (BXGO) programs, which set a redemption threshold (X) and possibly, an expiration term for the reward. In our model, forward-looking consumers interact with a monopolistic firm and strategically make purchase and redemption decisions over an infinite time horizon. Our analysis leads to the following results. First, a consumer’s purchase utility and purchase probability increase as her reward point inventory approaches the redemption threshold or expiration. These patterns are consistent with the “point pressure” phenomenon documented in the empirical literature. Second, a redemption threshold alone cannot improve the firm’s profit, unless it is coupled with a finite expiration term or a positive transaction utility that consumers may derive from reward redemption. Third, setting the optimal redemption threshold requires the program to strike a balance between the effective price paid by consumers and their purchase probabilities. These results have rich managerial implications for effectively designing reward programs.en_US
dcterms.accessRightsopen accessen_US
dcterms.bibliographicCitationOperations research, Nov.-Dec. 2021 , v. 69, no. 6, p. 1823-1841en_US
dcterms.isPartOfOperations researchen_US
dcterms.issued2021-11-
dc.identifier.eissn1526-5463en_US
dc.description.validate202201 bcrcen_US
dc.description.oaAccepted Manuscripten_US
dc.identifier.FolderNumbera0788-n01-
dc.identifier.SubFormID1656-
dc.description.fundingSourceRGCen_US
dc.description.fundingText15502420en_US
dc.description.pubStatusPublisheden_US
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