Dual Response in Conjoint Analysis

Abstract

Conjoint analysis often incorporates a no-choice option to allow respondents to opt-out of a choice task. This paper examines the benefits of a dual-response format in which respondents first select their preferred alternative from among a set of available alternatives excluding the no-choice option and then decide whether they would actually buy it. We show that respondents employ a budget constraint when responding to the second response task but not to the first, indicating that respondents assess affordability separately from preference. We also show that our model with the dual response format improves parameter estimation efficiency by 30% as measured by the Fisher information matrix relative to a standard model using a single-response format. We use our proposed budget constraint model to examine optimal pricing in a competitive market, where the standard model is shown to overestimate equilibrium prices.

Keywords: Economic choice, Budget constraints, Competitive pricing, Nash price equilibrium