An incentive compatible conjoint ranking mechanism.

The new mechanism was investigated in an empirical application related to consumer preferences for beef attributes. Results reveal that the consumers' preferences for ground beef were statistically indistinguishable when ranking products with the new incentive compatible mechanism and ranking products in a traditional hypothetical format. The fact that no differences were observed may be attributable to the fact that ground beef is a low-valued good and the opportunity cost of deviating from rational behavior is relatively small. This line of reasoning is supported by the additional finding that providing people information about pasture raised beef did not affect preferences for that attribute when evaluating ground beef. In contrast to the low-valued ground beef products, the new, nonhypothetical mechanism significantly influenced rankings of steaks. In particular, people were less sensitive to price changes in the incentive compatible mechanism than they were in the hypothetical rankings. Further, people tended to overstate their utility of having a steak in the hypothetical rankings as compared to the incentive compatible approach. Results also reveal that the error variance of the random utility function was significantly lower when the decision task was nonhypothetical. Finally, we found that the forecasted market share of a new pasture-raised steak was significantly lower in the hypothetical ranking as compared to the forecast from the incentive compatible mechanism.

Although conjoint ranking methods have the potential to provide much more information about people's preferences than conjoint choice methods, our results reveal this information advantage is partially offset by the fact that less information is conveyed about people's preferences for less preferred, higher ranked options as compared to the more preferred, lower ranked options. The next step in our research program is to determine which implementation method (choices versus ranking) and mechanism (hypothetical or nonhypothetical) best predicts actual retail shopping behavior.

The authors would like to thank Bailey Norwood for his suggestion of the use of a spinning wheel to implement the incentive compatible ranking mechanism.

[Received September 2006; accepted September 2007.]

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(1) To date, most applications of IC preference elicitation methods have involved experimental auctions. Lusk and Shogren (2007) show that more than 100 academic studies have been conducted using IC auctions to value new goods and services; however, to date such auction methods have not gained the widespread popularity among marketing academics and professionals as has conjoint analysis.

(1) To date, most applications of IC preference elicitation methods have involved experimental auctions. Lusk and Shogren (2007) show that more than 100 academic studies have been conducted using IC auctions to value new goods and services; however, to date such auction methods have not gained the widespread popularity among marketing academics and professionals as has conjoint analysis.

(2) In principle, any function in which the probability of receiving a product is monotonic in the assigned rank would be suitable; the function presented here is a particularly easy to implement.

(3) If it is desirable to let respondents express indifference between product profiles, the mechanism described in this section can be easily modified simply by letting people assign two products the same rank and re-scaling the probabilities to sum to one. In practice, this is easily handled by leaving one of the slices on the wheel blank and re-spinning the wheel if it happens to land on the blank slice.

(4) If people only cared about receiving additional money and not about the meat products, this would be reflected in our econometric results by finding the estimated utility derived from the amount of cash provided with the "no meat" option outweighing the disutility of having no meat; as we show later in our results, this is not the case.