The Value of Field Experiments
The feasibility of using field experiments to optimize marketing decisions remains relatively unstudied. We investigate category pricing decisions that require estimating a large matrix of cross-product demand elasticities and ask the following question: How many experiments are required as the numb...
| Main Authors: | , , , , |
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| Format: | Article |
| Language: | en_US |
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Institute for Operations Research and the Management Sciences (INFORMS)
2015
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| Online Access: | http://hdl.handle.net/1721.1/99138 https://orcid.org/0000-0003-2758-0116 https://orcid.org/0000-0003-2658-8239 |
| _version_ | 1826203175806304256 |
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| author | Li, Jimmy Q. Rusmevichientong, Paat Simester, Duncan Tsitsiklis, John N. Zoumpoulis, Spyros I. |
| author2 | Massachusetts Institute of Technology. Department of Electrical Engineering and Computer Science |
| author_facet | Massachusetts Institute of Technology. Department of Electrical Engineering and Computer Science Li, Jimmy Q. Rusmevichientong, Paat Simester, Duncan Tsitsiklis, John N. Zoumpoulis, Spyros I. |
| author_sort | Li, Jimmy Q. |
| collection | MIT |
| description | The feasibility of using field experiments to optimize marketing decisions remains relatively unstudied. We investigate category pricing decisions that require estimating a large matrix of cross-product demand elasticities and ask the following question: How many experiments are required as the number of products in the category grows? Our main result demonstrates that if the categories have a favorable structure, we can learn faster and reduce the number of experiments that are required: the number of experiments required may grow just logarithmically with the number of products. These findings potentially have important implications for the application of field experiments. Firms may be able to obtain meaningful estimates using a practically feasible number of experiments, even in categories with a large number of products. We also provide a relatively simple mechanism that firms can use to evaluate whether a category has a structure that makes it feasible to use field experiments to set prices. We illustrate how to accomplish this using either a sample of historical data or a pilot set of experiments. We also discuss how to evaluate whether field experiments can help optimize other marketing decisions, such as selecting which products to advertise or promote. |
| first_indexed | 2024-09-23T12:32:45Z |
| format | Article |
| id | mit-1721.1/99138 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T12:32:45Z |
| publishDate | 2015 |
| publisher | Institute for Operations Research and the Management Sciences (INFORMS) |
| record_format | dspace |
| spelling | mit-1721.1/991382022-09-28T08:27:09Z The Value of Field Experiments Li, Jimmy Q. Rusmevichientong, Paat Simester, Duncan Tsitsiklis, John N. Zoumpoulis, Spyros I. Massachusetts Institute of Technology. Department of Electrical Engineering and Computer Science Massachusetts Institute of Technology. Laboratory for Information and Decision Systems Sloan School of Management Li, Jimmy Q. Simester, Duncan Tsitsiklis, John N. The feasibility of using field experiments to optimize marketing decisions remains relatively unstudied. We investigate category pricing decisions that require estimating a large matrix of cross-product demand elasticities and ask the following question: How many experiments are required as the number of products in the category grows? Our main result demonstrates that if the categories have a favorable structure, we can learn faster and reduce the number of experiments that are required: the number of experiments required may grow just logarithmically with the number of products. These findings potentially have important implications for the application of field experiments. Firms may be able to obtain meaningful estimates using a practically feasible number of experiments, even in categories with a large number of products. We also provide a relatively simple mechanism that firms can use to evaluate whether a category has a structure that makes it feasible to use field experiments to set prices. We illustrate how to accomplish this using either a sample of historical data or a pilot set of experiments. We also discuss how to evaluate whether field experiments can help optimize other marketing decisions, such as selecting which products to advertise or promote. National Science Foundation (U.S.) (Grant CMMI-0856063) National Science Foundation (U.S.) (Grant CMMI-1158658) 2015-10-05T15:53:39Z 2015-10-05T15:53:39Z 2015-02 2012-05 Article http://purl.org/eprint/type/JournalArticle 0025-1909 1526-5501 http://hdl.handle.net/1721.1/99138 Li, Jimmy Q., Paat Rusmevichientong, Duncan Simester, John N. Tsitsiklis, and Spyros I. Zoumpoulis. “The Value of Field Experiments.” Management Science 61, no. 7 (July 2015): 1722–1740. https://orcid.org/0000-0003-2758-0116 https://orcid.org/0000-0003-2658-8239 en_US http://dx.doi.org/10.1287/mnsc.2014.2066 Management Science Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf Institute for Operations Research and the Management Sciences (INFORMS) Other univ. web domain |
| spellingShingle | Li, Jimmy Q. Rusmevichientong, Paat Simester, Duncan Tsitsiklis, John N. Zoumpoulis, Spyros I. The Value of Field Experiments |
| title | The Value of Field Experiments |
| title_full | The Value of Field Experiments |
| title_fullStr | The Value of Field Experiments |
| title_full_unstemmed | The Value of Field Experiments |
| title_short | The Value of Field Experiments |
| title_sort | value of field experiments |
| url | http://hdl.handle.net/1721.1/99138 https://orcid.org/0000-0003-2758-0116 https://orcid.org/0000-0003-2658-8239 |
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