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Activity Number:
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280
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Type:
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Contributed
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Date/Time:
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Wednesday, August 14, 2002 : 8:30 AM to 10:20 AM
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Sponsor:
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Section on Statistics and Marketing
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| Abstract - #300565 |
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Title:
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A Theory of New Product Demand Measurement
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Author(s):
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John Rotondo*+ and Mani Subramaniam
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Affiliation(s):
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AT&T Labs - Research and AT&T Labs - Research
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Address:
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, , , ,
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Keywords:
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new product demand ; discrete choice ; willingness-to-pay
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Abstract:
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We present a discrete choice methodology for estimating demand for a new product that does not belong to an existing product category. The estimates are derived from paired comparisons between various composites of a new product and a benchmark product with known demand. The use of a benchmark product in the comparisons provides a valid foundation for estimation of new product demand. The method represents a radical departure from purchase intention data and models. The underlying theory posits population willingness-to-pay (wtp) distributions for each composite product appearing in the paired comparisons. The outcomes of the paired comparisons and the benchmark product purchase indicator are sufficient to estimate the parameters of the wtp distributions of the composites. The new product demand curve is then derived from the composite wt. distributions. The theory allows for arbitrarily correlated wt. distributions and incorporates individual-level random fluctuations around a consumer's true wt.. We develop a Monte Carlo approach to maximum likelihood estimation and illustrate the application of the methodology on simulated and real data sets.
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