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Option framing and Markov chain: A descriptive approach in a state-space modeling of customer behavior

Maranon, Antonio LU ; Gustafsson, Peter LU and Nilsson, Peter (2015) In Working Papers in Statistics
Abstract
In the field of marketing, option framing is a product or service configuration where the consumers customize the package they wish to procure either by adding options to a base model, an initial configuration with a minimum number of essential features, or by subtracting options from a fully-loaded model, a product or service configuration with both essential and all of the optional features. Additive framing is selecting features to augment the base model, while subtractive framing is deselecting features from the fully-loaded model. A focal issue for companies that could possibly offer such products or services with option framing is finding out which process, additive or subtractive framing, is bound to give a final configuration with... (More)
In the field of marketing, option framing is a product or service configuration where the consumers customize the package they wish to procure either by adding options to a base model, an initial configuration with a minimum number of essential features, or by subtracting options from a fully-loaded model, a product or service configuration with both essential and all of the optional features. Additive framing is selecting features to augment the base model, while subtractive framing is deselecting features from the fully-loaded model. A focal issue for companies that could possibly offer such products or services with option framing is finding out which process, additive or subtractive framing, is bound to give a final configuration with more features. The scenarios of option framing can be described by a finite Markov chain process. The Markov chain attempts to capture the decision process of the two types of framing through the estimated probabilities of movement from one phase to the other. In each of the decision phases, the key measure is the number of features in the configuration and the transition probabilities. The option framing is used on an actual study, where the empirical results verify the theories favoring subtractive framing, such as differential loss aversion and anchoring-adjustment theories. Separate Markov chains are evaluated for additive and subtractive framing, with the final configurations of the product or service package, along with the corresponding number of options, as main results. (Less)
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author
organization
publishing date
type
Working Paper
publication status
published
subject
in
Working Papers in Statistics
issue
15
pages
16 pages
publisher
Department of Statistics, Lund university
language
English
LU publication?
yes
id
800bb009-d6c9-4a91-bfa3-c06be846ec41 (old id 8309588)
date added to LUP
2015-12-09 16:36:18
date last changed
2016-04-16 07:12:31
@misc{800bb009-d6c9-4a91-bfa3-c06be846ec41,
  abstract     = {In the field of marketing, option framing is a product or service configuration where the consumers customize the package they wish to procure either by adding options to a base model, an initial configuration with a minimum number of essential features, or by subtracting options from a fully-loaded model, a product or service configuration with both essential and all of the optional features. Additive framing is selecting features to augment the base model, while subtractive framing is deselecting features from the fully-loaded model. A focal issue for companies that could possibly offer such products or services with option framing is finding out which process, additive or subtractive framing, is bound to give a final configuration with more features. The scenarios of option framing can be described by a finite Markov chain process. The Markov chain attempts to capture the decision process of the two types of framing through the estimated probabilities of movement from one phase to the other. In each of the decision phases, the key measure is the number of features in the configuration and the transition probabilities. The option framing is used on an actual study, where the empirical results verify the theories favoring subtractive framing, such as differential loss aversion and anchoring-adjustment theories. Separate Markov chains are evaluated for additive and subtractive framing, with the final configurations of the product or service package, along with the corresponding number of options, as main results.},
  author       = {Maranon, Antonio and Gustafsson, Peter and Nilsson, Peter},
  language     = {eng},
  note         = {Working Paper},
  number       = {15},
  pages        = {16},
  publisher    = {Department of Statistics, Lund university},
  series       = {Working Papers in Statistics},
  title        = {Option framing and Markov chain: A descriptive approach in a state-space modeling of customer behavior},
  year         = {2015},
}