Numerically Stable Design Optimization With Price Competition

2012 ◽  
Author(s):  
W. Ross Morrow ◽  
Joshua Mineroff ◽  
Kate S. Whitefoot
Keyword(s):  
Engineering Design ◽  
Price Competition ◽  
Performance Metrics ◽  
Consumer Preferences ◽  
Mixed Logit ◽  
Sufficient Conditions ◽  
Mixed Logit Models ◽  
Game Theoretic ◽  
Pricing Problems ◽  
Decision Based Design

Researchers in Decision-Based Design have asserted that business objectives, e.g. profits, should replace engineering requirements or performance metrics as the objective for engineering design. Using profits as the objective for engineering design, however, requires modeling consumer preferences and competition between firms. Game theoretic “design-then-pricing” models—i.e. product design with price competition—provide an important framework for integrating consumer preferences and competition when design decisions must be made before prices are decided by a firm or by its competitors. This article proposes a method for solving design-then-pricing problems that exhibits improved efficiency and reliability, relative to existing methods. Numerical results for a vehicle design example using three solvers—matlab, KNITRO, and SNOPT—to validate this claim. We also highlight the importance of checking the Second-Order Sufficient Conditions in design-then-pricing problems that use Mixed Logit models of demand.

Numerically Stable Design Optimization With Price Competition

2014 ◽  
Vol 136 (8) ◽  
Author(s):  
W. Ross Morrow ◽  
Joshua Mineroff ◽  
Kate S. Whitefoot
Keyword(s):  
Price Competition ◽  
Performance Metrics ◽  
Consumer Preferences ◽  
Market Model ◽  
Optimal Designs ◽  
Future Price ◽  
Design Decisions ◽  
Computational Optimization ◽  
Game Theoretic ◽  
The Impact

Researchers in decision-based design (DBD) have suggested that business objectives, e.g., profits, should replace engineering requirements or performance metrics as the objective for engineering design. This requires modeling market performance, including consumer preferences and competition between firms. Game-theoretic “design-then-pricing” models—i.e., product design anticipating future price competition–provide an important framework for integrating consumer preferences and competition when design decisions must be made before prices are decided by a firm or by its competitors. This article concerns computational optimization in a design-then-pricing model. We argue that some approaches may be fundamentally difficult for existing solvers and propose a method that exhibits both improved efficiency and reliability relative to existing methods. Numerical results for a vehicle design example validate our theoretical arguments and examine the impact of anticipating pricing competition on design decisions. We find that anticipating pricing competition, while potentially important for accurately forecasting profits, does not necessarily have a significant effect on optimal design decisions. Most existing examples suggest otherwise, anticipating competition in prices is important to choosing optimal designs. Our example differs in the importance of design constraints, that reduce the influence the market model has on optimal designs.

Persuasive Advertising in a Vertically Differentiated Competitive Marketplace

2020 ◽  
Vol 18 (1) ◽  
pp. 145-177
Author(s):  
Yuanfang Lin ◽  
Chakravarthi Narasimhan
Keyword(s):  
Willingness To Pay ◽  
Price Competition ◽  
Consumer Preferences ◽  
Product Category ◽  
General Assumption ◽  
Reservation Price ◽  
Theoretic Approach ◽  
Persuasive Advertising ◽  
Game Theoretic ◽  
The Cost

AbstractDespite the widely acknowledged existence in practice, the theoretical literature on persuasive advertising is generally vague about exactly how such advertising could affect consumer preferences, except for the general assumption that persuasive advertising affects consumer willingness to pay or simply “shifts demand.” This paper proposes a theoretical framework for characterizing different ways that persuasive advertising may affect consumer utility in a vertically differentiated marketplace. Firstly, persuasive advertising could simply raise consumers’ reservation price for the product category. Secondly, persuasive advertising could enhance consumers’ perception about the product quality offered by the advertising firm. Thirdly, persuasive advertising could increase consumers’ willingness to pay for quality increment. Preliminary evidences from lab studies are presented to support the existences of the proposed effects. Using a game-theoretic approach, we study two firms’ decision in the adoption of persuasive advertising of a particular effect and the associated price competition. Findings from the theoretical model analyses indicate that factors influencing a firm’s decision in persuasive advertising include consumer heterogeneity, degree of product differentiation, the effectiveness and the cost of such advertising. In a vertically differentiated competitive marketplace, persuasive adverting is a more desirable strategic tool for firms of higher-quality products to further establish a competitive advantage.

scholarly journals Consumer preferences for organic vegetables in southwestern Nigeria: A choice experiment approach

2021 ◽  
Vol 16 (1) ◽  
pp. 1-13
Author(s):  
Joseph Akinwehinmi ◽  
◽  
Taye Amos ◽  
Kolawole Ogundari ◽  
◽  
...  
Keyword(s):  
Choice Experiment ◽  
Consumer Preferences ◽  
Mixed Logit ◽  
Third Party ◽  
Sub Saharan Africa ◽  
Southwestern Nigeria ◽  
Mixed Logit Models ◽  
Guarantee System ◽  
Sub Saharan ◽  
Safe Food

In sub-Saharan Africa, identifying estimates of consumers’ preferences and willingness to pay (WTP) for safe food continues to receive attention in the literature. Using experimental data from Nigeria, we examined the source of heterogeneities in preference and WTP for organically produced food. The subjective valuation by consumers of certification in relation to third-party certification and the participatory guarantee system (PGS) was also investigated. A sample of 196 households subjected to a discrete choice experiment yielded 1 764 observations that were analysed using the generalised multinomial logit and mixed logit models. The results reveal a strong preference for food safety in terms of reducing chemical residue, which dominated the respondents’ preference and WTP patterns. Concerning certification attributes, consumers were positively disposed to third-party certification, but showed no significant preference for the PGS form of certification. Significant heterogeneities in preference were due mainly to age and awareness of organic products. We suggest that policies should focus on consumers’ understanding of organic food, third-party certification, and organic agriculture

Estimation of market equilibrium values for apple attributes

2018 ◽  
Vol 10 (1) ◽  
pp. 135-151 ◽  
Author(s):  
Jong Woo Choi ◽  
Chengyan Yue ◽  
James Luby ◽  
Shuoli Zhao ◽  
Karina Gallardo ◽  
...  
Keyword(s):  
Consumer Preferences ◽  
Supply And Demand ◽  
Mixed Logit ◽  
Market Equilibrium ◽  
Breeding Programs ◽  
Content Type ◽  
Mixed Logit Models ◽  
Equilibrium Prices ◽  
Demand Curves ◽  
Social Surplus

Purpose Development of new cultivars requires extensive genetic knowledge, trained personnel, and significant financial resources, so it is crucial for breeders to focus on the attributes most preferred by the key supply chain stakeholders such as consumers and producers. The purpose of this paper is to identify which attributes generate the highest total revenue or social surplus, information that breeders can take into account as they allocate resources to focus on attributes in their breeding programs. Design/methodology/approach This study used mail-in and online surveys to collect consumer and producer choice experiment data, and then employed mixed logit models to analyze and simulate individual producer and consumer willingness to pay (WTP) for the apple attributes. Findings Based on the simulation results, this study derived the supply and demand curves and the market equilibrium prices and quantities for each apple attribute. Based on the WTP analysis for both consumer and producer, this paper found the highest equilibrium price and welfare for apples come from crispness, followed by flavor. Originality/value The authors propose a framework to estimate the equilibrium prices and quantities of a product based on the results of choice experiments. The framework can be easily adapted to understand any countries’ producer and consumer preferences for certain products.

Including cost income ratio into utility function as a way of dealing with ‘exploding’ implicit prices in mixed logit models

2012 ◽  
Vol 18 (4) ◽  
pp. 370-380 ◽  
Author(s):  
Marek Giergiczny ◽  
Sviataslau Valasiuk ◽  
Mikolaj Czajkowski ◽  
Maria De Salvo ◽  
Giovanni Signorello
Keyword(s):  
Utility Function ◽  
Mixed Logit ◽  
Logit Models ◽  
Mixed Logit Models ◽  
Income Ratio ◽  
Implicit Prices

Attribute Non-Attendance and Consumer Preferences for Online Food Products in Germany

2020 ◽  
Vol 69 (1) ◽  
pp. 31-48
Author(s):  
P. Christoph Richartz ◽  
Lukas Kornher ◽  
Awudu Abdulai
Keyword(s):  
Latent Class ◽  
Consumer Preferences ◽  
Mixed Logit ◽  
Meat Products ◽  
Food Product ◽  
Latent Class Models ◽  
Preference Heterogeneity ◽  
Significant Heterogeneity ◽  
Processing Strategies ◽  
Class Models

In this article, we apply a choice experiment meth-od to examine consumers’ preferences for online food product attributes, using survey data for German consumers for meat products. We use both mixed logit and latent class models to analyze preference heterogeneity and sources of heterogeneity, as well as endogenous attribute attendance models to account for consumers’ attribute processing strategies. The empirical results reveal significant heterogeneity in preferences for online meat attributes among consumers. We also find that consumers’ willingness to pay estimates are highly influenced by their attribute processing strategies.

Analyzing Participant Behaviors in Design Crowdsourcing Contests Using Causal Inference on Field Data

2018 ◽  
Vol 140 (9) ◽  
Author(s):  
Ashish M. Chaudhari ◽  
Zhenghui Sha ◽  
Jitesh H. Panchal
Keyword(s):  
Causal Inference ◽  
Engineering Design ◽  
Field Data ◽  
Task Complexity ◽  
Empirical Studies ◽  
Concept Generation ◽  
Related Factors ◽  
Factors Affecting ◽  
Future Design ◽  
Game Theoretic

Crowdsourcing is the practice of getting ideas and solving problems using a large number of people on the Internet. It is gaining popularity for activities in the engineering design process ranging from concept generation to design evaluation. The outcomes of crowdsourcing contests depend on the decisions and actions of participants, which in turn depend on the nature of the problem and the contest. For effective use of crowdsourcing within engineering design, it is necessary to understand how the outcomes of crowdsourcing contests are affected by sponsor-related, contest-related, problem-related, and individual-related factors. To address this need, we employ existing game-theoretic models, empirical studies, and field data in a synergistic way using the theory of causal inference. The results suggest that participants' decisions to participate are negatively influenced by higher task complexity and lower reputation of sponsors. However, they are positively influenced by the number of prizes and higher allocation to prizes at higher levels. That is, an amount of money on any following prize generates higher participation than the same amount of money on the first prize. The contributions of the paper are: (a) a causal graph that encodes relationships among factors affecting crowdsourcing contests, derived from game-theoretic models and empirical studies, and (b) a quantification of the causal effects of these factors on the outcomes of GrabCAD, Cambridge, MA contests. The implications of these results on the design of future design crowdsourcing contests are discussed.

scholarly journals A Trip Purpose-Based Data-Driven Alighting Station Choice Model Using Transit Smart Card Data

Complexity ◽  
2018 ◽  
Vol 2018 ◽  
pp. 1-14 ◽  
Author(s):  
Kai Lu ◽  
Alireza Khani ◽  
Baoming Han
Keyword(s):  
Open Systems ◽  
Choice Model ◽  
Mixed Logit ◽  
Random Coefficients ◽  
Logit Models ◽  
Transit Systems ◽  
Trip Purpose ◽  
Mixed Logit Models ◽  
Key Factor ◽  
Rich Data

Automatic fare collection (AFC) systems have been widely used all around the world which record rich data resources for researchers mining the passenger behavior and operation estimation. However, most transit systems are open systems for which only boarding information is recorded but the alighting information is missing. Because of the lack of trip information, validation of utility functions for passenger choices is difficult. To fill the research gaps, this study uses the AFC data from Beijing metro, which is a closed system and records both boarding information and alighting information. To estimate a more reasonable utility function for choice modeling, the study uses the trip chaining method to infer the actual destination of the trip. Based on the land use and passenger flow pattern, applying k-means clustering method, stations are classified into 7 categories. A trip purpose labelling process was proposed considering the station category, trip time, trip sequence, and alighting station frequency during five weekdays. We apply multinomial logit models as well as mixed logit models with independent and correlated normally distributed random coefficients to infer passengers’ preferences for ticket fare, walking time, and in-vehicle time towards their alighting station choice based on different trip purposes. The results find that time is a combined key factor while the ticket price based on distance is not significant. The estimated alighting stations are validated with real choices from a separate sample to illustrate the accuracy of the station choice models.

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