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Conditional Pricing vs. Alternative Specific Pricing

Could anyone advise if there are any hesitations to using alternative specific pricing vs. conditional pricing for a CBC?  

Let's say we are testing a variety of pack sizes: 10-pack, 20-pack, 50-pack, 100-pack.  So we can't just use a single pricing attribute because they are priced so differently in real life.  So the normal approach (at least for me) would be to use conditional pricing.  However, with conditional pricing you are restricted to the same number of prices for each pack size.  In my current project, the client is most interested in the best seller (e.g., the 20-pack) and so wants to test more price points (7 of them).  Most other pack sizes only need 2 or 3 price points.  It seems I would more efficiently use my degrees of freedom (parameters) by using alternative specific pricing.

But this begs the question why anyone would use conditional pricing, since it seems like alternative specific pricing provides a broader range of more customizable solutions.  I know I am jumping the gun saying this, but because conditional pricing is available, it makes me hesitant to try a different method.  I suppose conditional pricing is easier to execute than alternative specific pricing, so better for the beginner user.  Not to mention conditional pricing is available without the advanced module.
asked Jun 27, 2014 by Joel Anderson Bronze (1,585 points)

1 Answer

+2 votes
Best answer
Good thoughts.

Using different numbers of price levels per alternative may start running into some bias due to the "number of levels" effect.  This may be more theoretical bias than very strong practical bias in your particular case, but it is something to think about.

Some people like to use conditional pricing because if the interaction effect between brand and price (which drives the conditional pricing table) is not significant, then the researcher can save a lot of degrees of freedom by just estimating main effects.

You could do the same thing with alternative-specific pricing (if the price slopes don't differ across the alternatives), but it requires additional  data processing to collapse the separate prices into a generic price (which most of our users would prefer to avoid).

So, you're right...for the advanced user with the advanced design module, alternative-specific price attributes does essentially the same thing as conditional pricing...but with more flexibility (but also potentially more data processing work).
answered Jun 27, 2014 by Bryan Orme Platinum Sawtooth Software, Inc. (191,140 points)
selected Jun 30, 2014 by Joel Anderson
Thanks for your detailed feedback!  All makes sense :)