A network-based discrete choice model for decision-based design

Zhenghui Sha*, Yaxin Cui, Yinshuang Xiao, Amanda Stathopoulos, Noshir Contractor, Yan Fu, Wei Chen

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

Customer preference modelling has been widely used to aid engineering design decisions on the selection and configuration of design attributes. Recently, network analysis approaches, such as the exponential random graph model (ERGM), have been increasingly used in this field. While the ERGM-based approach has the new capability of modelling the effects of interactions and interdependencies (e.g., social relationships among customers) on customers' decisions via network structures (e.g., using triangles to model peer influence), existing research can only model customers' consideration decisions, and it cannot predict individual customer's choices, as what the traditional utility-based discrete choice models (DCMs) do. However, the ability to make choice predictions is essential to predicting market demand, which forms the basis of decision-based design (DBD). This paper fills this gap by developing a novel ERGM-based approach for choice prediction. This is the first time that a network-based model can explicitly compute the probability of an alternative being chosen from a choice set. Using a large-scale customer-revealed choice database, this research studies the customer preferences estimated from the ERGM-based choice models with and without network structures and evaluates their predictive performance of market demand, benchmarking the multinomial logit (MNL) model, a traditional DCM. The results show that the proposed ERGM-based choice modelling achieves higher accuracy in predicting both individual choice behaviours and market share ranking than the MNL model, which is mathematically equivalent to ERGM when no network structures are included. The insights obtained from this study further extend the DBD framework by allowing explicit modelling of interactions among entities (i.e., customers and products) using network representations.

Original languageEnglish (US)
Article numbere7
JournalDesign Science
Volume9
DOIs
StatePublished - Mar 24 2023

Keywords

  • customer preference modelling
  • decision-based design
  • exponential random graph model
  • multinomial logit model

ASJC Scopus subject areas

  • Modeling and Simulation
  • Visual Arts and Performing Arts
  • General Engineering

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