Extensions to the Analysis of Choice Studies (1997)

In this paper (originally published in our 1997 Sawtooth Software Conference Proceedings) Tom Pilon of TRAC, Inc. presents some additional types of analysis that can be done using standard CBC data. He reports results from a beer study, and shows how cross-elasticities for brands can be calculated (by regressing the log of choice volume on the log of price) and incorporated into a market simulator.

Pilon argues that the standard logit simulator which assumes constant cross-elasticity across brands was not entirely realistic for the beer market. A cross-elasticity simulator lets brands that compete closely (perceived as close substitutes) take relatively more share from one another as a result of price changes than from brands which are not perceived to be as substitutable. Pilon also demonstrates how to convert a cross-elasticity matrix into a "brand similarities matrix" for use in an MDS perceptual map. Brands which compete closely with one another are situated close to one another on the map.

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