Modeling Noncompensatory Choices With a Compensatory Model for a Product Design Search

Market-based product design has typically used compensatory models that assume a simple additive part-worth rule. However, marketing literature has demonstrated that consumers use various heuristics called noncompensatory choices to simplify their choice decisions. This study aims to explore the suitability of compensatory modeling of these noncompensatory choices for the product design search. This is motivated by the limitations of the existing Bayesian-based noncompensatory mode, such as the screening rule assumptions, probabilistic representation of noncompensatory choices, and discontinuous choice probability functions in the Bayesian-based noncompensatory model. Results from using compensatory models show that noncompensatory choices can lead to distinct segments with extreme part-worths. In addition, the product design search problem suggests that the compensatory model would be preferred due to small design errors and inexpensive computational burden.