Lecture 3

Question 1

Parsimonious Theory of Consumer Choice

Answer 1

Among several products, the consumer chooses the one that offers the highest value.

A consumer gets utility V from purchasing a product

i: a product feature/attribute
Ai: whether the product has the attribute
Wi: weight of the attribute (-) how much the consumer cares about the product

Question 2

How consumers make choices:

Answer 2

1. Identify Consumer Needs
   a. recognition
   b. information search (available alternatives)
2. Estimate the Importance of Needs
   a. compute attributes using formula
3. Estimate the Demand of a Product
   a. choose product with highest V

Question 3

Market Research Methods

Answer 3

Qualitative: Observation, One-on-one interview, Focus Group
Quantitative: Survey, Conjoint Analysis

Question 4

Qualitative Research Method

Answer 4

Observation:
a. Observe consumers’ daily life/shopping behavior
b. Objective but costly
c. Measures things that people won’t tell you
Interview:
a. In-depth interview with individual consumers
b. Get deeper insights, good for attitudes/feelings
Focus Group:
a. Discussion between 6-12 discussants
b. Group interaction triggers more insights, but can
be biased due to social influence or pressure.

Question 5

Quantitative Research Method

Answer 5

Survey

   a. Ask consumer to answer set of questions
   b. How to get respondents? 
          - On-line, off-line, crowd-sourcing platform, professional panel

Conjoint Analysis