I would suggest that Klemperer and Png compare the fare structures of airlines in Europe, where there is a dramatic increase in cost per mile compared to American airline price structures. This is a clear indication of how the free market economy can include marketing ideas such as frequent flyer programs that benefit the travel industry and still offer lower fares.
The frequent flyer programs certainly encourage brand loyalty for the airlines, but it has not made the industry any less prone to price competition. If their suggestions were correct, we would see the airline with the largest frequent flyer programs enjoying the highest revenue/miles and higher fare structures. In fact, these airlines are very competitive in price and suffer from low margin or worse, losses.
Is it unreasonable for these airlines to be permitted to use clever marketing ideas to fill their planes? The consumer and the airline benefit, and in the United States, that is a natural byproduct of competition.
JAMES R. ANDERSON