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Game theoretic derivations of competitive strategies in conjoint analysis

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Abstract

While conjoint analysis has been applied in a wide variety of different contexts in Marketing, most applications fail to explicitly consider retaliatory reactions from competitors. In this paper, a methodological extension is developed for conjoint analysis by explicitly modeling competition in a game theoretic context. The Nash equilibrium concept is employed to model competitive reactions to produce design, and its implications for reactive product strategies are discussed. The optimal product design problem for each firm is formulated as a nonlinear integer programming problem, which is solved via a specialized branch and bound method combined with a heuristic. In order to compute a Nash equilibrium, a sequential iterative procedure is proposed. The proposed procedure is illustrated under several scenarios of competition using previously published conjoint data.

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Authors and Affiliations

  1. Graduate School of Management, Rutgers University, 180 University Ave., 07102-1895, Newark, NJ

    S. Chan Choi

  2. Marketing and Statistics Depts. School of Business Administration, University of Michigan, 48109, Ann Arbor, MI

    Wayne S. Desarbo

Authors
  1. S. Chan Choi
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  2. Wayne S. Desarbo
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Additional information

This research has been supported by the Henry Rutgers Research Fellowship, Rutgers University.

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Choi, S.C., Desarbo, W.S. Game theoretic derivations of competitive strategies in conjoint analysis. Marketing Letters 4, 337–348 (1993). https://doi.org/10.1007/BF00994352

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