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Variance in summed price lower than 30%


I am setting up a ACBC conjoint with 8 attibutes. The ranges in price is very large depending on size of the product. In order to avoid too many prohobitions and levels, we therefore decided to use summed price - for the first time.
We have a few questions we hope you might be able to help us with.

As the  price difference between levels are very small, we have had to decrease variance percentage to 23,5 %. In the technical paper you recommend the prices to vary at least +/- 30%. Can you tell me what it will mean for the output that our variance is smaller.

Also as price only varies for package size, it is the only attribute you can assign a price in the BYO - will that have any influence on the results?

I hope you can help, it would be greatly appreciated.
asked Jun 16, 2014 by anonymous
edited Jun 16, 2014 by Walter Williams

1 Answer

0 votes
I'm glad you are wondering about this.  The recommendation for +/- 30% is a conservative recommendation to do well in all cases.  If you look at the full white paper on "Three Ways to Treat Price..." at http://www.sawtoothsoftware.com/downloadPDF.php?file=price3ways.pdf

...you will see that if the Base Price makes up a relatively large percentage of the total price, then you can use much less random shock to Summed Price than 30% and still do very well in terms of precision of the price beta (maybe as low as +/-15%, for example).

I recommend constraining price during utility estimation in any case for ACBC.
answered Jun 16, 2014 by Bryan Orme Platinum Sawtooth Software, Inc. (175,715 points)