Three Approaches to Overall Price in Conjoint Analysis

This research paper presents three approaches to treating overall price in conjoint analysis studies: the Traditional Approach, Conditional Pricing, and Summed Price. The Traditional Approach includes price as a separate attribute in the study design, allowing for independent variation of each attribute. This method is straightforward but may lead to unrealistic combinations of features and prices. Conditional Pricing enhances realism by associating price levels with product characteristics, using a lookup table to determine actual prices based on attributes. This method maintains orthogonality in design but complicates the interpretation of part-worth utilities. Summed Price, introduced in Sawtooth Software's ACBC, generalizes Conditional Pricing and estimates overall price as a continuous function. It allows for independent estimation of feature levels without the influence of price premiums, thus avoiding potential errors from rounding. Each approach has its own advantages and challenges, which are discussed in detail throughout the paper.