An Integrative Model for Complex Conjoint Analysis
46 Pages Posted: 12 Nov 2020 Last revised: 28 Apr 2021
Date Written: April 8, 2021
Abstract
A complex product exists whenever a marketplace offering is made up of simpler, component products. Computer manufacturers offer memory, speed, and graphics upgrades and vacation planners offer excursion packages that are bundled together and included in the total price of the offering. The challenge in modeling demand for complex products lies in simultaneously studying the major drivers of a purchase decision and also the composition of the components. Demands on data increase as more features are included in an analysis, and at some point, it becomes necessary to study components separately. This paper proposes an integrative model for studying features of a complex product utilizing multiple conjoint exercises within a single structure. We show that the integration of results from a focused, component conjoint analysis with a main, market-facing analysis needs to account for differences in the price levels of the component and main products. We find evidence of a non-linear pricing effect where component features are under-valued when the price of the component accounts for a small fraction of the total cost of a product. Our model is illustrated with data from the automotive industry where various option packages are available.
Keywords: Non-linear price effect, Willingness to pay, Willingness to buy, Behavioral Decision Theory
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