Analysis of Reward Programs in Membership Services Using Agent-based Simulation

In service industries, service providers offer various reward programs to consumers with the aim to build customer loyalty and increase sales. In this research, we model membership services as club goods and analyze the reward programs. Club goods are defined as excludable and nonrival public goods. We conduct equilibrium analysis, experiments with human subjects and multi-agent simulation. In theoretical equilibrium, all consumer players become a member. But the results of the experiments indicate that provider players do not properly set the entry fee and the service price for members and consumer players sometimes make irrational decisions of membership entry. Moreover, we elucidate subjects' behavior mechanism of the membership entry by simulations. Results of simulations suggest that the subjects' behavior might be based on the value of how many times they should use services in order to recover payment of the entry fee.