On the effect of constraining parameters in conjoint analysis

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1、LESSONSFROMACOMPARATIVE(CROSS-COUNTRY)STUDYUSINGCONJOINTANALYSIS:WHYNOTUSEALLTHEINFORMATION?NielsJ.Blunch,TheAarhusSchoolofBusiness,DenmarkAbstractRe-examinationofdatafromtwocomparative(cross-country)studiesusingconjointanalysisshowsthatsignificantimprovementcanbeachievedbyusingtwooftenneglect

2、edkindsofaprioriinformation:Knowledgeoftheexpectedorderofpreferencesforthevariouslevelsofoneormoreattributesandthefactthaterrortermsinutilityfunctionsreferringtothesamerespondentmaycorrelate.Whyrestricttheparameterspace?Therehasbeenalotofwritingontheprosandconsofvariousmethodsinconjointanalysi

3、s:fullprofileversustrade-of,fullprofileversusadaptivemethodsetc.Comparedtothat,publishedresearchwithdiscussionontheeffectsandpossibleadvantagesofconstrainingtheparametersoftheutilityfunctionsisrathersparse.Judgedfromtheenormousnumberofpublishedexamplesoftheuseofconjointanalysisthisseemstobeare

4、flectionoflimiteduseofconstraininginacademicaswellasincommercialusesofconjointanalysis.Tomethisisabitsurprising.Everyonewhohasworkedwithconjointanalysishasexperiencedexamplesofe.g.respondentswhoapparentlypreferlowerqualitiestohigherqualitiesifthepricesareidentical.Sucharesultfromaconjointanaly

5、sisisobviouslydueto“noise”.Now,if,ingeneral,wehaveknowledgeofsomepropertiesoftheparametersinourmodel,itseemsobviousthatweshouldincorporatethisknowledgeinourestimationprocedureandtherebyforcetheestimatestosharetheseproperties.Bydoingso,wereducetheerrorsinourestimation.Thiswillofcourseimprovepre

6、dictivepowerattheexpenseofapoorerfittotheactualdata.Butrememberthatthebetterfittothedataisobtainedbycapitalisationonchance,andthereforeisnotlikelytobefoundbyrepetitionofthestudy.Sotheconclusionis:Constrainingtheparameterspacewillusuallyimprove(andneverreduce)thepredictivevalidity(iftheconstrai

7、ntsarewell-chosen).Inthisshortnote,IshalldemonstratetheeffectsofconstrainingtheparametersintwoconjointstudiesofbuyingbehaviouroflargeEuropeanretailchains.ThetwostudiesconcerntheimpactofvariousfactorsonEuropeantradebuyers’listingofnewpro