Exploring Product Solution Differences Due to Choice Model Selection in the Presence of Noncompensatory Decisions With Conjunctive Screening Rules

Abstract

Research in market-based product design has often used compensatory preference models that assume an additive part-worth rule. These additive models have a simple, usable form and their parameters can be estimated using existing software packages. However, marketing research literature has demonstrated that consumers sometimes use noncompensatory-derived heuristics to simplify their choice decisions. This paper explores the quality of optimal solution obtained to a product line design search when using a compensatory model in the presence of noncompensatory choices and a noncompensatory model with conjunctive screening rules. Motivation for this work comes from the challenges posed by Bayesian-based noncompensatory models: the need for screening rule assumptions, probabilistic representations of noncompensatory choices, and discontinuous choice probability functions. This paper demonstrates how respondents making noncompensatory choices with conjunctive rules can lead to compensatory model estimations with distinct respondent segmentation and relative, large absolute part-worth values. Results from a product design problem suggest that using a compensatory model can provide benefits of smaller design errors and reduced computational costs. Product design optimization problems using real choice data confirm that the compensatory model and the noncompensatory model with conjunctive rules provide comparable solutions that have similar likelihoods of not being screened out when using a consideration set verifier. While many different noncompensatory heuristic rules exist, the presented study is limited to conjunctive screening rules.