The Performance of Competitive and Lottery Incentive Schemes Vis-À-Vis Fixed Fee Incentive Schemes in Improving Conjoint Analysis

Paying a fixed amount of money to participants in choice-based conjoint (CBC) studies is the industry standard. Recently, Ding (2007) has shown that a lottery incentive scheme outperformed a fixed fee incentive scheme when predicting out-of-sample choices. We achieve two research goals in the current paper to extend our understanding of incentive schemes in the context of CBC studies. One, we investigate if a higher fixed-fee (e.g. $50 instead of $10) helps improve out-of-sample predictions. Two, the lottery incentive scheme does not induce competition among CBC study participants. Therefore, we investigate the theoretical properties and empirical effectiveness of competitive incentive schemes relative to lottery and fixed incentive schemes. Our key findings with respect to hit rates for out-of-sample predictions are: (a) offering higher amounts of money is ineffective, and (b) competitive incentive schemes outperform the lottery incentive scheme (Hit Rates of 41 % and 62% for the 2 proposed competitive schemes vs. 29% for the lottery incentive scheme)