Abstract
We propose a predictive model of redemption and liability to support short, medium, and long term planning and operational decision-making in Loyalty Reward Programs (LRPs). The proposed approach is an aggregate inventory model in which the liability of points is modeled as a stochastic process. An illustrative example is discussed as well as a real-life implementation of the approach to facilitate use and deployment considerations in the context of a frequent flyer program, an airline industry based LRP.
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