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25 J. Consumer Pol'y 1 (2002)

handle is hein.journals/jrncpy25 and id is 1 raw text is: Catherine Liston-Heyes Pie in the Sky? Real Versus Perceived Values of Air Miles ABSTRACT. Over 20 million people in the Britain and the US collect air miles - many significantly distorting their consumption patterns to increase the rate of accumulation. You can now earn and spend air miles without ever stepping foot on an airplane, and air miles from the more popular scheme have begun to take on the status of a pseudo-currency. The importance has attracted the widespread attention of gov- ernments (worried about how they should most appropriately be incorporated into the tax base) and financial regulators (worried about how the associated liabilities should be dealt with under accounting and financial reporting legislation). To both groups a key hurdle has been knowing how to value an air mile. The paper outlines the characteristics of air miles that make them peculiarly well suited to use as a shadow currency. The perceived value of air miles in a panel of UK consumers is assessed (using the contingent valuation method) and compared to the actual value. The former is shown to be substantially larger than the latter - consumers systemat- ically over-estimate the purchasing power of air miles. These findings explain why air mile programmes are, and are likely to continue to be, popular promotional tools with businesses but are potentially harmful to consumers. 1. INTRODUCTION Consumers around the world are collecting air miles. Until five years ago they could only be used to pay for flights and class upgrades with a given air carrier. Now, they can be used to purchase flight tickets with competing carriers and to acquire an increasingly wide range of other goods from furniture to flowers. Moreover, collectors no longer have to fly to earn them. There are 120 different air-miles schemes, each of which is endorsed by hundreds of participating retailers. Air miles no longer have much to do with flying and the desire to accumulate them is distorting consumption patterns. Consumers can earn air miles through their banks, utilities, super- markets, hardware stores, and credit cards and this is affecting their purchasing decisions. Collectors are accumulating air miles at a faster rate than they are redeeming them. As a result, there are currently over 3 trillion unused Journal of Consumer Policy 25: 1-26, 2002. I 2002 Kluwer Academic Publishers. Printed in the Netherlands.

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