Construction of Efficient Heterogeneous Choice Designs: A New Approach

Extant research on choice designs in marketing focuses on the construction of efficient homogeneous designs where all respondents get the same design. Sandor and Wedel (2005) were the first to propose the construction of efficient heterogeneous designs where different respondents or groups of respondents get different subdesigns, and demonstrate substantial efficiency gain when such heterogeneous designs are employed. A significant hurdle in widespread adoption of heterogeneous designs is the high computation cost, even when the number of subdesigns contained in the heterogeneous design is restricted to be small. In this paper we propose a new approach for the construction of efficient heterogeneous choice designs. In contrast to extant approaches that are based on an exact design framework where it is computationally prohibitive to do an exhaustive search to find a globally optimal design, our proposed approach is based on the continuous design framework where well-established mathematical theories can be leveraged for quick identification of a globally optimal design. The proposed approach makes it feasible to generate a highly efficient choice design that is completely heterogeneous -- a unique subdesign for each individual respondent in the choice experiment. The proposed approach is the first in the marketing literature to find a completely heterogeneous choice design with assured high global design efficiency using the continuous design framework. Results from simulation and empirical studies demonstrate superior performance of the proposed approach over extant approaches in constructing efficient heterogeneous choice designs.