In his recent paper, Prof. David Gal from the University of Illinois examines the limitations of conjoint analysis, a tool often used in litigation to estimate consumer preferences.
Introduction
Conjoint analysis is a survey-based methodology used for measuring consumer preferences. The method was popularized in marketing research in the 1970s and has since become a frequently used tool in new product design, target market selection, and new product pricing decisions.
During the last decade, conjoint analysis has also found use in the context of litigation. It has been used to assess preferences for product features in intellectual property disputes and to assess damages in product liability and false advertising class actions.
In litigation, the battleground regarding the appropriateness of the use of conjoint analysis has historically focused on whether the methodology can model market prices and whether the specific conjoint analysis as implemented can reliably estimate consumer preferences for the product at issue.
In some cases, courts accepted conjoint analysis as a methodology that can estimate market prices and damages in product liability and false advertising class actions. In other cases, conjoint analysis was rejected as an appropriate methodology to estimate market prices and damages because conjoint analysis by itself can at best estimate consumer preferences (or demand).
Other criticisms of conjoint analysis involved survey design issues such as not incorporating realistic product choices available in the market, not properly isolating the effect of allegedly misleading statements, and testing a hypothetical product attribute that does not properly match the plaintiffs' theory of liability. In sum, criticisms of conjoint in litigation (and elsewhere) generally revolve around a specific implementation of conjoint rather than a challenge to the methodology per se.
However, a recent review article by David Gal and Itamar Simonson in "Consumer Psychology Review" (Gal and Simonson (2021)) challenges the foundations of conjoint analysis. The authors argue that the methodology does not capture how consumers actually form preferences and make choices in the real world. Further, in reviewing the evidence, the authors conclude that the limited validation studies of conjoint analysis have not supported the value of the methodology in predicting actual consumer choices.
In the sections below, this article introduces conjoint analysis, describes some of its foundational weaknesses, and provides examples from litigation settings that cast further doubt on the utility and reliability of the use of conjoint in litigation.
This article was originally published by Westlaw in March 2022.The views expressed in this article are solely those of the author, who are responsible for the content, and do not necessarily represent the views of Vega Economics. For more information about Professor Gal, please email experts@vegaeconomics.com.
