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Comparing SMRT's simulation outcomes

Hi, I  would like to figure whether to introduce a second product (offered by the same company) or not. I am running simulations including the original (first) product and two competing products and then add the new (second) product at different prices.

I read about the red bus/blue bus problem and IIA. Is it legitimate to compare shares of preference if the number of products differs between simulations? Is there anything I can do to ensure valid and interpretable results (e.g. using Randomized FC instead if SoP?).

asked Aug 3, 2015 by anonymous

1 Answer

0 votes
Formally, if you want to be quite academic about it, the most appropriate way to examine this problem is to have created an experiment where sometimes respondents saw K products on the screen and sometimes respondents saw K+1 products on the screen.  Then, you build utility models that predict those two scenarios so that you can have confidence in the appropriate cannibalization (cross) effects when the +1 product is added to the scenario...also so you can be confident that you've captured the response error (scale factor) due to seeing K products at a time on the screen vs. K+1 products on the screen.  That said, most every researcher in practice doesn't have the time, budget, or inclination to do this.

Rather, researchers mostly rely on the benefits of individual-level modeling plus other tricks such as RFC in simulations to hopefully reduce IIA problems to something approaching near nothing.

I generally recommend using individual-level models under HB plus the RFC market simulation model if comparing K products in the simulation to K+1 products in the simulation.
answered Aug 3, 2015 by Bryan Orme Platinum Sawtooth Software, Inc. (128,265 points)