FRONTIERS
Truth beyond common beliefs
Florian BauerAbstract
The deduction of partial utilities within conjoint analyses is based on the assumption that people maximise their utility (“homo oeconomicus”). This assumption is contradicted by a broad swathe of empirical findings which have demonstrated that people systematically fail to make rational decisions. They nonetheless make predictable errors, so their decisions essentially remain ‘calculable’. Consciously or unconsciously, they simply follow a decision rule that complements utility-maximising choice behaviour. In a first step, we were able to statistically model this sub-optimal choice behaviour, and in a second step we combined both algorithms – the classic utility-maximising choice model and its sub-optimal counterpart – within one “Multi Rule Conjoint Analysis” (MRC) that adaptively models a respondent’s behaviour on the basis of either of these choice models. Overcoming the narrow perspective of rational assumptions, MRC is able to improve predictions by more than 45% compared to standard CBC merely by more extensively exploiting an existing set of data.
Florian Bauer
Dr. Florian Bauer studied Psychology and Economics at the Technical University in Darmstadt, at MIT, and at Harvard University. He devoted himself to research into decision anomalies and the psychology of pricing, which were also the subject of his doctorate. Starting his career as a strategy consultant at Booz, Allen & Hamilton 1996, he joined with two colleagues in founding Vocatus AG in Munich in 1999, a full-service market research institute that now employs over 50 researchers. In 2005 he won the ‘German Market Research Award‘ for the ‘Study of the Year‘ for which Vocatus is nominated again this year. In 2006 and 2007 he was nominated for the ESOMAR “Best Paper Award”.
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