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In this paper I clarify the theoretical background of what “tech ecosystem” means and how a business ecosystem approach can be used in the tech industry. I outline the main actors of the tech ecosystem: (1) enterprises and entrepreneurs; (2) accelerators and incubators; (3) educational bodies; (4) sources of finance and funding; (5) policymakers. All these actors co-exist in the environment of the tech ecosystem and, as part of it, have an impact on each other. I draw attention to high growth firms, also known as the scaleups, which are the largest contributors to economic growth. As a result of this theoretical background analysis, a better understanding of Scotland’s tech ecosystem has been achieved, and an explicit mind map has been built.

I review case studies from other regions to understand what kind of best practices could be applied to improve Scotland’s tech ecosystem. Then I provide twelve policy recommendations which I suggest for consideration in the long-term strategic plan of the development of Scotland’s ecosystem.

This thesis investigates the loyalty penalty, its impact on consumers, and potential policy responses across four chapters. It also contributes to ongoing debates between policymakers and businesses regarding the loyalty penalty.

In the introductory chapter, I provide an overview of the regulatory and academic literature and the general concepts used in this thesis to investigate the loyalty penalty.

The second chapter presents a theoretical model to explain the loyalty penalty. I use a classic framework that distinguishes between shoppers and non-shoppers, extending it into two periods. In each period, two firms compete on price. In the first period, firms set a base price, which remains constant across both periods, and in the second period, they set a renewal price. A consumer who ends up paying the renewal price in the second period is subject to the loyalty penalty. The difference between the renewal and base prices demonstrates how the loyalty penalty can arise from low consumer engagement, leading to its persistence in equilibrium.

In the third chapter, I analyse a duopoly with three types of consumers. Using a framework similar to that employed by regulators, which distinguishes between savvy shoppers, average consumers, and vulnerable consumers, I assess the effects of the loyalty penalty on these groups, particularly vulnerable consumers, and explore how firms adjust their pricing decisions based on the presence of various consumer types in the market. Additionally, this chapter contributes to the discussion among policymakers on understanding and defining consumer vulnerability.

The final chapter examines the policy responses implemented by regulators, including Ofcom, Ofgem, and the FCA, to mitigate the loyalty penalty through the lens of the models developed in Chapter 2 and Chapter 3. These policies include banning the loyalty penalty, imposing price caps, introducing social tariffs, and promoting educational initiatives. The chapter evaluates these policies, and concludes that some policy responses can have unintended consequences, requiring careful scrutiny, and concludes that policies should aim to protect consumers without undermining market competitiveness.