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Rewards based on public loyalty program promote cooperation in public goods game

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  • Cheng, Fei
  • Chen, Tong
  • Chen, Qiao

Abstract

The loyalty program (LP) is a marketing campaign designed to encourage customer loyalty by rewarding them. Motivated by extensively applied LP in real society, we propose a public loyalty program (PLP) in the public goods game (PGG). In the PLP, players are rewarded differentially depending on whether their cumulative contribution exceeds the reward threshold. The progressive accumulation rate scheme (PAR) rewards player for increasing accumulation rate (points obtained per unit contribution), while the progressive redemption rate scheme (PRR) increases the redemption rate (subsidy obtained per unit point). By means of theoretical and numerical analyses, we find that PAR can promote cooperation, but the effect is not significant. In the PRR, the combination of a small base redemption rate and a large progressive redemption rate achieves the highest level of cooperation at the medium reward threshold. The introduction of PLP in the PGG fosters and rewards the behavior and attitude loyalty of participants. While reducing cost pressure, it has reshaped the long-term bilateral relationship between the government and the public.

Suggested Citation

  • Cheng, Fei & Chen, Tong & Chen, Qiao, 2020. "Rewards based on public loyalty program promote cooperation in public goods game," Applied Mathematics and Computation, Elsevier, vol. 378(C).
    • Handle: RePEc:eee:apmaco:v:378:y:2020:i:c:s0096300320301491
    DOI: 10.1016/j.amc.2020.125180
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