The ability of ratings and choice conjoint to predict market shares - A Monte Carlo simulation

Abstract

We use a Monte Carlo simulation with many synthetic data sets to compare ratings and choice conjoint analysis in their ability to correctly predict market shares under varying market conditions. Our results provide guidance to researchers seeking to use conjoint analysis for managerial decisions. Our recommendations are quite different from the recommendations of prior researchers who compared conjoint methods using single empirical data sets. Our results indicate that one must, at least roughly, assess the degree of consumers' heterogeneity in preferences, product similarity in the marketplace, typical consumers' choice-rule (probabilistic or deterministic), and magnitude of error in measurement of utilities in order to make a prudent choice between ratings and choice conjoint analysis. (C) 2001 Elsevier Science Inc. All rights reserved.