Utility Covariances and Context Effects in Conjoint MNP Models

Haaijer, Rinus; Wedel, Michel; Vriens, Marco; Wansbeek, Tom
September 1998
Marketing Science;1998, Vol. 17 Issue 3, p236
Academic Journal
AbstractExperimental conjoint choice analysis is among the most frequently used methods for measuring and analyzing consumer preferences. The data from such experiments have been typically analyzed with the Multinomial Logit (MNL) model. However, there are several problems associated with the standard MNL model because it is based on the assumption that the error terms of the underlying random utilities are independent across alternatives, choice sets, and subjects. The Multinomial Probit model (MNP) is well known to alleviate this assumption of independence of the error terms. Accounting for covariances in utilities in modeling choice experiments with the MNP is important because variation of the coefficients in the choice model may occur due to context effects. Previous research has shown that subjects' utilities for alternatives depend on the choice context, that is, the particular set of alternatives evaluated. Simonson and Tversky's tradeoff contrast principle describes the effect of the choice context on attribute importance and patterns of choice. They distinguish local contrast effects, which are caused by the alternatives in the offered set only, and background contrast effects, which are due to the influence of alternatives previously considered in choice experiments. These effects are hypothesized to cause correlations in the utilities of alternatives within and across choice sets, respectively.The purpose of this study is to develop an MNP model for conjoint choice experiments. This model is important for a more detailed study of choice patterns in those experiments. In developing the MNP model for conjoint choice experiments, several hurdles need to be taken related to the identification of the model and to the prediction of holdout profiles. To overcome those problems, we propose a random coefficients (RC) model that assumes a multivariate normal distribution of the regression coefficients with a rank one factor structure on the covariance matrix ...


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