Applications for Pricing Decisions
One significant application of conjoint analysis is in helping the manager with pricing decisions. Determination of optimal price for a new product (or brand) is a typical application. One way to determine the best price is to estimate the market obtainable from the new product at different feasible prices for the new product profile. We described the use of conjoint simulators in Chap. 3. Additional information on cost functions can be integrated into the estimates of market share to yield estimates of profit from the new product at various prices. The price at which the computed profit is highest can be deemed to be the best price for the new product. This approach can also yield a generic estimate of price elasticity for the product category as a whole.
It is shown how experimental design, Monte Carlo simulation, and analysis of variance (ANOVA) can be used to evaluate software performance. Software based on iterative algorithms is especially difficult to evaluate. A case study based on measuring the a..