Individual level or segmentation based market simulation?

Natter, Martin and Feurstein, Markus (1999) Individual level or segmentation based market simulation? Working Papers SFB "Adaptive Information Systems and Modelling in Economics and Management Science", 41. SFB Adaptive Information Systems and Modelling in Economics and Management Science, WU Vienna University of Economics and Business, Vienna.


Download (208kB)


In many studies, choice based conjoint analysis is used to build a market simulator to develop marketing strategies; i.e., shares-of-preference are taken as market share forecasts. However, conjoint data are collected in interview situations, which may differ considerably from real shopping behavior. In this paper, we test the internal and external validity of four commercial choice based conjoint pricing studies including a total of 43 brands. We use conjoint and sales data to assess the relative performance of two modern approaches to estimate conjoint parameters: the segmentation based Latent Class model and the individual level Hierarchical Bayes approach. Our paper confirms previous results of the internal superiority of the Hierarchical Bayes approach. The main result of our investigation is that internal validity does not predict external validity and that Latent Class shows the same real world performance as Hierarchical Bayes. Both models show an average error of 4.2% in market share level prediction and a correlation of 69% between conjoint forecasts and real market shares. (author's abstract)

Item Type: Paper
Keywords: market simulation / Choice Based Conjoint Analysis / Hierarchical Bayes / latent class / external validity
Divisions: Departments > Informationsverarbeitung u Prozessmanag. > Produktionsmanagement > Taudes
Departments > Finance, Accounting and Statistics > Statistics and Mathematics
Departments > Marketing > Service Marketing und Tourismus
Departments > Informationsverarbeitung u Prozessmanag. > Informationswirtschaft
Depositing User: Repository Administrator
Date Deposited: 05 Mar 2002 11:49
Last Modified: 22 Oct 2019 00:41


View Item View Item


Downloads per month over past year

View more statistics