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A Data-Driven Network Analysis Approach to Predicting Customer Choice

Sets for Choice Modeling in Engineering Design

Article in Journal of Mechanical Design · July 2015

DOI: 10.1115/1.4030160

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Mingxian Wang
Department of Mechanical Engineering,
Northwestern University,
Evanston, IL 60208
e-mail: mingxianwang2016@u.northwestern.edu
Wei Chen1
Wilson-Cook Professor in Engineering Design
Department of Mechanical Engineering,
Northwestern University,
Evanston, IL 60208
e-mail: weichen@northwestern.edu
A Data-Driven Network Analysis
Approach to Predicting Customer
Choice Sets for Choice Modeling
in Engineering Design
In this paper, we propose a data-driven network analysis based approach to predict indi-
vidual choice sets for customer choice modeling in engineering design. We apply data
analytics to mine existing data of customer choice sets, which is then used to predict
choice sets for individual customers in a new choice modeling scenario where choice set
information is lacking. Product association network is constructed to identify product
communities based on existing data of customer choice sets, where links between prod-
ucts reflect the proximity or similarity of two products in customers’ perceptual space. To
account for customer heterogeneity, customers are classified into clusters (segments)
based on their profile attributes and for each cluster the product consideration frequency
is computed. For predicting choice sets in a new choice modeling scenario, a probabilis-
tic sampling approach is proposed to integrate product associations, customer segments,
and the link strengths in the product association network. In case studies, we first imple-
ment the approach using an example with simulated choice set data. The quality of pre-
dicted choice sets is examined by assessing the estimation bias of the developed choice
model. We then demonstrate the proposed approach using actual survey data of vehicle
choice, illustrating the benefits of improving a choice model through choice set prediction
and the potential of using such choice models to support engineering design decisions.
This research also highlights the benefits and potentials of using network techniques for
understanding customer preferences in product design. [DOI: 10.1115/1.4030160]

Keywords: choice set, choice modeling, customer preference, product association, data
analytics, network analysis

1 Introduction collected. Approach has been taken to either use all vehicles in
the market as the choice set or randomly pick a few vehicles2 to
Customer choice modeling is gaining increasing attention in
form individual choice sets [16,17]. While both treatments may be
engineering design because it allows prediction of future product
reasonable under certain contexts [18], studies show that misspe-
demand as a function of engineering design attributes and the tar-
cification of choice sets may result in inferior choice model esti-
get market description [1]. Recent efforts toward incorporating
mates, especially when a large set of choice alternatives exist
customer preferences into engineering design have addressed a
[19,20]. By contrast, it has been shown that good predictions of
wide spectrum of design interests such as platform-based product
reduced choice sets can better approximate individual choice
family design [2], hierarchical systems design [3], usage and
behaviors and thus yield improved modeling results [21].
social context based design [4,5], multilevel and multidisciplinary
In this paper, we propose a data-driven network analysis
design [6,7], design under market competition [8], consider-then-
approach to predict individual choice sets for choice data with
choose model to design optimization [9], and robust design and
missing choice set information. Given a customer’s profile and the
sensitivity evaluation [10]. Although all of the aforementioned
final choice made, an individual’s choice set is predicted based on
studies involve the modeling of customer choices, the practical
existing choice set data for a similar product. In the aforemen-
implementation is challenged by the availability of choice set data
tioned vehicle example, choice set information gathered from a
[11,12].
different source, e.g., J.D. Power vehicle survey (JDPA), can be
Choice set, in the context of engineering design, is defined as
used for learning and further predicting choice sets in order to use
“a set of product alternatives available to an individual who will
the NHTS data for choice modeling. The key idea of our approach
seriously evaluate through comparisons before making a final
is to construct a customer association network of products using
choice.” The choice set information is often unavailable in the
existing choice set survey data. Network links and their strengths
collected market data, but is rather important for building choice
reflect the proximity or similarity of two products in customers’
models. For example, for vehicle choice modeling, the National
perceptual space, indicating what product alternatives are more
Household Travel Survey (NHTS) is a rich set of data that records
likely to be considered together by a customer. This line of rea-
vehicle ownerships, demographics of households, and detailed in-
soning is supported by rich literature in cognitive psychology
formation on customer travel behaviors in the United States [13];
[22,23] and is similar to the co-occurrence analysis in mining
however, information on individual’s vehicle choice set was not
association rules [24,25]. Taking vehicle as an example, if the
strength of network link is larger between “Toyota Camry” and
1
Corresponding author. “Honda Civic” than that between Toyota Camry and “BMW 7,”
Contributed by the Design Automation Committee of ASME for publication in
the JOURNAL OF MECHANICAL DESIGN. Manuscript received September 9, 2014; final
2
manuscript received March 10, 2015; published online May 19, 2015. Assoc. Editor: Studies show that the number of vehicles a customer seriously considers is often
Bernard Yannou. in the range of 3-6. [14,15]

Journal of Mechanical Design Copyright V

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 we can infer that a customer who is interested in Toyota Camry is
more likely to consider Honda Civic than BMW 7 in forming a
choice set.
For modeling the psychological process of choice set formation,
various studies have been conducted in literature in multiple
domains such as marketing and transportation research
[14,15,20,26–34]. Based on the two-stage noncompensatory–
compensatory decision model [15,20,27], a customer is concep-
tualized as first filtering some irrelevant alternatives using
relatively simple criteria (noncompensatory decision making) for
determining the composition of a choice set, and then performing
detailed trade-offs (compensatory decision making) to evaluate
remaining options in a choice set. Examples of customers’ non-
compensatory criteria include brand preferences, product aware-
ness, budget constraints, product’s range of applicability, and
environmental consciousness. Two distinctive classes of methods
have evolved to address choice set formation or prediction. One
class of methods explicitly generate a selected set of feasible
alternatives for each customer from all possible alternatives using
generation criteria such as screening based on critical attributes
[29–32], explicit random constraints to determine the choice set
probability [26,28], or hierarchical cluster analysis to identify rel-
evant products [34]. The other class of methods simulates the non-
compensatory effects implicitly through a compensatory utility
function, such as the technique of constrained multinomial logit
model [33].
Different from these existing methods that model choice set
effect within utility function or infer choice sets using a priori
behavioral assumptions, our proposed approach is data-driven.
We employ network analysis to mine product consideration asso-
ciations based on existing choice set data collected from single or
multiple sources and then predict individual-specific choice sets
for new data. Our key assumptions are: (1) The application prob-
lem involves a large set of product alternatives and the prediction
of small choice sets is needed; (2) The product alternatives in the
existing and new datasets mostly overlap; (3) Customer
social–demographical attributes are similar in both datasets. To
account for customer heterogeneity in choice set formation, we
divide a broad market into several distinct customer segments
based on customer sociodemographical and usage characteristics.
In prediction, the probability of selecting an alternative into a
choice set integrates the information of product associations, cus-
tomer segments, and the link strengths in a product association
network. Integrating relational information from a product associ-
ation network with heterogeneity considered by customer segmen-
tations is a unique aspect of the proposed method.
The rest of the paper is organized as follows. First, technical
backgrounds on discrete choice analysis and network modeling
are provided in Sec. 2. Then, a novel data-driven network analysis
approach for choice set mining and prediction is outlined in Sec.
3. For illustration and validation, a study using synthetic data is
presented in Sec. 4, and is followed by an example using actual
vehicle data in Sec. 5. Conclusions and methodological implica-
tions are summarized in Sec. 6.
2 Technical Background
2.1 Discrete Choice Analysis in Engineering Design. The
core idea of discrete choice analysis in engineering design is to
predict future product demand (choice probability) as a function
of product design and customer attributes across a heterogeneous
customer population. The choice utility Unk for a customer n and a
design alternative k is formed by an observed component Wnk and
an unobserved random factor enk. The deterministic part of utility
Wnk is expressed as a function of customer-desired product attrib-
utes Ank and customer profile attributes Sn, conditioned on the
individual choice set CSn [1]
Unk ¼ Wnk þ enk ; if k 2 CSn (1)
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Wnk ¼ f ðb : Ank ; Sn Þ; if k 2 CSn (2)
The customer-desired product attributes Ank refer to key product
features that are important to a customer’s choice. The customer
profile attributes Sn include the socio-economic attributes (e.g.,
income), anthropometric variables (e.g., customer height), pur-
chase history, and usage context attributes (e.g., use frequency)
[1]. The model coefficients b are statistically determined based on
the observational choice data. It is noted that the estimated indi-
vidual choice probability heavily depends on the choice set com-
position [12,28]. The decision of which alternatives to be included
in the choice set influences the overall log-likelihood function of
the model as well as the estimated model coefficients.
2.2 Network Modeling of Association Rules. Network anal-
ysis has emerged as a key method for statistical analysis of com-
plex relationships depicted in a simple network graph, where
nodes represent individual entities and ties represent relationships
between the entities [35]. Recent studies in product design have
demonstrated the benefits of network analysis to characterize a
complex product as a network of components that share technical
interfaces or connections [36,37]. Association relations among
products have been used to generate customer perceptual maps in
marketing research [38] and improve the mining strategy of the
transactional data in information system research [24,39]. Never-
theless, constructing product association networks based on con-
sideration relations in choice sets is not well studied and serve as
a unique contribution of this work for understanding customer
choice behaviors.
Standard metrics of association rules, such as “lift” [25], can be
used to quantify the strength of the connection between two prod-
ucts based on how often they appear in the same choice set. Lift
between a product i and a product j is defined as [25]
Pði; jÞ
liftði; jÞ ¼ (3)
PðiÞPðjÞ
where P(i) represents the probability of occurrence of product i in
a choice set, and P(i, j) is the probability that both i and j appear
in the same choice set. A lift value greater than 1 means i and j
appear more frequently than if we assume the two products are
independent, while a lift below 1 indicates negative dependence.
Although the absolute value of lift has no precise statistical mean-
ing, its tie to the chi-squared test indicates that a larger lift value
corresponds to a stronger dependence [25]. Using the lift measure,
there is no need to determine ad-hoc thresholds for rules pruning
and reduction, which could be a common issue when using other
association measures. Moreover, the lift measure has no direc-
tional implication and treats the product associations uniformly,
which is desirable for choice set formation.
3 A Data-Driven Network Analysis Approach for
Choice Set Prediction
Two important aspects need to be taken into account in devel-
oping algorithms for choice set prediction. The first aspect
involves the determination of the level of relevance of a product
to an individual’s purchase decision. Customers are aware of
many brands and models of products, but not all alternatives are
seriously considered for purchase [14,20]. Second, choice set is
the result of individual- and context-specific judgments. The
choice set can be very different even for two similar customers
who face the same choice problem. Thus, a realistic model of
choice set generation should be probabilistic [20]. We present a
data-driven network analysis approach to address the above two
aspects in choice set prediction. To address the first aspect of iden-
tifying relevant products in choice sets, a product association net-
work is first constructed and product communities are identified.
To handle the second aspect of heterogeneity and stochasticity,
Transactions of the ASME
 customer segments are identified to further determine the relative
consideration frequency that is used as the basis for predicting
customer-specific product consideration probability by taking into
account the link strengths between products. A graphical illustra-
tion of the major steps involved is shown in Fig. 1.
3.1 Mining Product Association Relations and Customer
Clusters in Choice Set Data. Choice set data can be collected
from various sources. Representative methods include using Inter-
net clickstream data to capture the products viewed by a customer
and the purchase choice made [40], designing surveys for collect-
ing choice set information [14,27], and collecting customer scan-
ner panel data or customer purchase history [29]. In this study,
survey data of choice sets is analyzed to discover the associations
of product alternatives, identify the strengths of associations, and
detect product community groups as well as customer segments.
3.1.1 Construction of an Association Network of Product
Alternatives. In modeling customers’ top-of-mind product associ-
ations, we construct a product association network to determine
what products often appear together in customers’ considerations
and how strong the associations are. Each node in the network
represents a product alternative and a link exists between two
product alternatives if they frequently co-occur in the same choice
set. Based on the definition of lift in Sec. 2.2, we define the
strength of a connection Lij between product i and product j as

liftði; jÞ if > 1
Lij ¼ (4)
0 otherwise
A link appears between two products if and only if two products
have a significant positive association indicated by the lift value.
An illustrative network with 10 vehicles extracted from the com-
plete network constructed using JDPA data is shown in Fig. 2.
When a link exists, it implies the two linked product alternatives
are very likely to be considered together by a customer. The
strength value of the link indicates how often the vehicle pairs
appear together in a choice set (e.g., “Volvo S60” has link strength
4.3718 with “Lincoln MKX”). The isolated node (“Land Rover
Range Rover Sport”) indicates that this vehicle has no significant
association relations to other vehicles in the network. It should be
noted that in this work the association of products is analyzed
based on their co-occurrence probability in customer’s considera-
tion, as opposed to the similarity of products based on features.
3.1.2 Discovery of Product Communities. In network analy-
sis, a community refers to the group of nodes with dense connec-
tions internally and sparser connections between the groups.
Within a product association network, product communities are
identified to group the strongly correlated products together. The
resulting community structure can be used to gain insights into the
market structure of products that customers follow in forming
choice sets. The product communities (C) also provide starting
points for choice set predictions, as more details are provided in
Sec. 3.2.
Different from classical clustering approaches that employ the
distance or similarity matrix, network community detection
requires the use of algorithms developed from graphical proper-
ties. In this research, the Newman’s optimal modularity method
Fig. 1 Graphical illustration of the major steps
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[41] is employed to identify the product communities. The objec-
tive function defined using the modularity Q is
 
1 X di dj  
Q¼ Lij  d Ci ; Cj (5)
2m ij 2m
where Lij represents thePstrength of the link between node i and
node j, and m ¼ ð1=2Þ ij Lij is the total strength of links in the
P
graph. The degree of node i is denoted as di, and di ¼ j Lij . The
d-function equals 1 if node i and node j belong to the same com-
munity, 0 otherwise. Modularity Q measures the difference
between the weighted links that fall within communities and the
expected value of the same quantity in a random network with the
same node degrees [41]. The larger the modularity value, the bet-
ter the community partitioning is.
In Fig. 2, two distinct product communities identified using the
modularity approach are illustrated. One community contains five
small compact vehicles in green dots (e.g., Honda Civic,
“Hyundai Sonata,” etc.) while the other community is essentially
high-performance midsize vehicles in red dots (e.g., Volvo S60,
Lincoln MKX, etc.). Further examination of similarities and
differences of product features within each community will help
better understand how different product attributes influence cus-
tomers’ consideration decisions.
3.1.3 Customer Segmentation. To capture the heterogeneity
among customers in choice set formation, customer segmentation
is used to group customers based on similarities they share with
respect to customer profile attributes that are relevant to purchase
needs and preferences. Depending on the market’s characteristics,
customer segmentation is classified into observable and unobserv-
able bases. The observable group (including geographic, demo-
graphic, and socio-economic variables) is the most popular
source, as it is often readily available and provides a quick snap-
shot of a market. The unobservable group includes psycho-
graphics, personality, and buying behaviors, with the assumption
that people’s activities, interests, and opinions are often decisive
factors for their purchase decisions [42]. Customer clusters (G)
can be identified by various statistical approaches, such as
K-means clustering, latent class analysis, decision trees, hierarchi-
cal clustering, and ensemble models [43]. In this study, the K-
means algorithm is used to identify customer segments (see the
example in Sec. 5).
As a result of choice set data mining, product associations
(including the link strengths (L) and communities (C)) and cus-
tomer clusters (G) are identified. In Sec. 3.2, we show how these
analytical results are integrated to predict relevant choice sets for
individual customers.
Fig. 2 Illustration of vehicle association network and product
communities
JULY 2015, Vol. 137 / 071410-3
 3.2 A Data-Driven Strategy for Predicting Heterogeneous
Choice Sets. Given the results from mining the existing choice
set data, we propose a probabilistic sampling method to predict
individual choice sets in new data where the information of cus-
tomer attributes and their final choices are available but the choice
set information is lacking.
Figure 3 shows an illustrative diagram of how different sources
of information come together in the prediction process. Given the
purchase choice k for a customer n, we first identify which prod-
ucts are strongly associated with product k based on the product
consideration association network identified using the existing
data. The candidate alternatives in a choice set will be sampled
from the same product community (noted as Ck) as the purchase
choice k. Furthermore, products directly linked to the purchase
choice k with higher link strengths (i.e., higher L) than the other
products in the community are more likely to be considered. For
example, suppose the purchase choice vehicle k is Hyundai
Sonata, a community of products containing Hyundai Sonata can
be identified from the vehicle association network, as shown in
the upper left corner of Fig. 3. Among these products, Honda
Civic and Toyota Camry are more likely to be considered than
other vehicles, as the two vehicles are directly linked to Hyundai
Sonata in the network. Moreover, Toyota Camry has a higher
chance to be considered than Honda Civic due to its higher link
strength (21.337 versus 3.4333). Following the same notation
defined in Sec. 3.1, we represent the link strength between the pur-
chase choice k and any other product k0 in the association network
as Lkk0 .
Predicting choice set based on product associations and link
strengths does not take into account customer heterogeneity. For
example, midage high income people are more likely to consider
hybrid electric vehicles (HEV) than other groups of customers;
however, this information is missing from the aggreated product
association network. We overcome this limitation by relating
product community Ck to customer cluster Gn to which a customer
n belongs to, through the evaluation of relative consideration fre-
quency (noted as FGn (k0 )) for a product k0 in community Ck. As
shown in Eq. (6), based on the existing choice set data,
Nk0 Gn computes the total number that the group of customers in Gn
considers product k0 in their choice sets. The summation in the
denominator indicates the total number that all products (except
for the choice k) in community Ck are considered by a group of
customers Gn. The ratio in Eq. (6) reflects the relative considera-
tion frequency of a product k0 among a community of products Ck
for a specific group of customers Gn. In the preceding example,
when the customer’s final choice is Sonata, the relative considera-
tion frequency FGn (k0 ) is evaluated for the other four vehicles in
the community (Camry, Caliber, Civic, and Mazda) in association
with customer cluster Gn, as shown in the pie chart of Fig. 3
Fig. 3 Illustration of the choice set prediction approach
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Nk0 Gn 0
FGn ðk0 Þ ¼ ; for 8k 6¼ k and k0 2 Ck (6)
jC
Xk j1
0
N k Gn
k0 ¼1
As the relative product consideration frequency defined above
does not account for product co-occurance within a community, a
metric called co-consideration frequency CFnk (k0 ) of a product k0
is proposed to take into account the link strength Lkk0 in a product
community

FGn ðk0 Þ; if Lkk0 ¼ 0; 0
CFnk ðk0 Þ ¼ for k 6¼ k and k0 2 Ck
FGn ðk0 Þ  Lkk0 ; otherwise;
(7)
Equation (7) shows that when the product k0 is not directly linked
to the purchase choice k in the network (i.e., Lkk0 ¼ 0), the esti-
mated co-consideration frequency remains the same as the relative
consideration frequency shown in Eq. (7). When an association
link exists between a considered product k0 and the purchase
choice k (i.e., Lkk0 > 1), the estimated co-consideration frequency
is increased by multiplying it with the link strength.
Our prediction approach follows a sequential sampling proce-
dure in generating choice sets. The sampling probability for each
considered product k0 is referred to as customer-specific product
consideration probability CPnk (k0 ), which is a normalized quan-
tity of the estimated co-consideration frequency CFnk (k0 ). The
sum of CPnk (k0 ) over all possible products k0 equals 1.
CFnk ðk0 Þ 0
CPnk ðk0 Þ ¼ X ; for 8k 6¼ k and k0 2 Ck (8)
CFnk ðk0 Þ
k0
The above equations do not address the situation where the pur-
chase choice k is an isolated node (product) in the network. In this
case, we expand the product community Ck in Eqs. (6)–(8) to the
whole product network including all available product alterna-
tives. As shown in Eq. (9), the consideration probability in this
case is simply the pure relative consideration frequency of a prod-
uct k0 considered by customer cluster Gn.
0
CPnk ðk0 Þ ¼ CFnk ðk0 Þ ¼ FGn ðk0 Þ; for 8k 6¼ k (9)
Equations (6)–(9) have several implications. First, except for an
isolated choice k, sampling is restricted to a community of prod-
ucts that are directly or indirectly linked to the purchase choice k
in the product community network. Products outside the commu-
nity network Ck are not considered in sampling. Second, the distri-
bution of the consideration probability CPnk depends on both the
product association community Ck and the customer cluster Gn
through the evaluation of consideration frequency FGn (k0 ) and as
well as the co-consideration frequency CFnk (k0 ). Thus, the
method takes into account the systematic heterogeneity in cus-
tomer preference. Since the sampling follows probabilistic distri-
butions, even if two customers share similar profiles and make the
same purchase choice, the predicted choice sets can still be differ-
ent, taking into account the random heterogeneity in customer
preferences.
To ensure the sampled product alternatives are mutually exclu-
sive in an individual choice set, the sampling procedure is
employed by following one product after another until the choice
set size reaches a desired one. When the size is unknown, the
average number of choice set size in the training data is used as a
guideline. The whole prediction process is operated sequentially
to determine the individual choice sets from one customer to
another.
As introduced in Sec. 1, our approach assumes that the mining
choice set data and the prediction data share very similar product
Transactions of the ASME
 Table 1 Consideration rules applied to generate true individual choice sets in simulation
Rules for continuous attr.
Rule 1: A1 > threshold1L threshold1L
Rule 2: A2 < threshold2H threshold2H
Rule 3: A3 > threshold3L threshold3L
Rule 4: A3< threshold3H threshold3H
Rules for binary attr.
Rule 5 a: A4 ¼ 1
Rule 5 b: A4 ¼ 0
alternatives and customer demographics S. When the prediction
data only contains a subset of alternatives that belong to the min-
ing choice set data, the group consideration frequency Nk0 Gn for
the irrelevant products should be set to zero to avoid being
sampled in prediction. When a new product appears in the new
data but is not found in the existing choice set data, the new prod-
uct will be assumed to be independent from other products and
treated as an isolated node in the association network. Information
of the current market share of the new product will be used for
describing the sampling distribution. Specifically, one can use the
choice frequency in the prediction data to approximate Nk0 Gn in
Eq. (6) and compute CPnk in Eq. (9). An illustrative example
using two different sets of market data is provided in Sec. 5.4.
Similarly, for clustering customers based on demographic attrib-
utes S, if attributes in the two datasets do not completely overlap,
only the shared attributes will be used in clustering. In the extreme
case where no customer information is available, one can still
implement the approach by treating all customers as a homogene-
ous group, as shown by our simulation study in Sec. 4.
4 Case Study of Synthetic Data
The goal of our synthetic data study is to evaluate the improve-
ment of choice modeling using the proposed approach for choice
set prediction. Using the synthetic choice set data and the prede-
fined choice model parameters, we are able to measure the estima-
tion bias of the model parameters as a result of choice set
misspecifications under different noise scenarios.
4.1 Generation of Choice Set Data. We generate a popula-
tion of 10,000 customers who use different consideration rules
over a total of 100 product alternatives. Product alternatives are
described by four explanatory variables (A1–A4), three of which
(A1, A2, and A3) are continuous variables while the remaining one
(A4) is a binary variable. Literature shows that customers often
develop heuristic decision rules to select products in forming their
choice sets [27]. Five hypothetical decision rules covering all four
product attributes are created for choice set formation. Using vehi-
cle as an example, rules can be associated with the price and fuel
economy. As shown in Table 1, we define Rule 1 and Rule 3 by
setting lower thresholds on attributes A1 and A3. Rule 2 and Rule
4 are associated with upper thresholds on A2 and A3. The hetero-
geneity of a decision rule among customers is modeled by the
threshold value, which is randomly sampled from a bounded uni-
form distribution whose range is defined by the attribute level of
existing products. For example, the bounded uniform distribution
for threshold2H in Rule 2 guarantees that the sampled threshold
value is higher than at least 40% of low-end products (U1 ð0:4Þ)
and lower than at least 10% of available products (U1 ð0:9Þ) in
the data, where U1 ðÞ stands for the standardized normal distribu-
tion function. In generating the synthetic data, we also take into
the fact that not all customers will consider all rules. The fraction
of customers who consider a particular rule is shown in Table 1. A
customer may consider all five rules or none of the rules listed.
The simulated data have an average choice set size of 13, among
the 60 out of 100 alternatives being considered one or more times.
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Heterogeneity % of customers (%)
 
 Unif U1 ð0:2Þ; U1 ð0:7Þ  60
1 1
 Unif U ð0:4Þ; U ð0:9Þ 80
 Unif U1 ð0:1Þ; U1 ð0:4Þ  20
 Unif U1 ð0:6Þ; U1 ð0:9Þ 20
Heterogeneity % of customers (%)
— 20
— 20
4.2 Choice Model Specification and Choice Response
Simulation. Given the simulated “true” choice sets described
above, the purchase decision is made based on the random utility
as defined in Eq. (1). The prespecified utility function for this case
study is shown in Eq. (10), where the systematic component Wnk
is a linear sum of four product attributes A1–A4. The error compo-
nent enk for all k 2 CSn is randomly drawn from a Gumbel distri-
bution with a variance of p2 =6
Wnk ¼ b1 Ak1 þ b2 Ak2 þ b3 Ak3 þ b4 Ak4 ; if k 2 CSn (10)
We study two levels of model noise (error component) on the per-
formance of the proposed approach. Following the method in Ref.
[44], two scenarios are examined by adjusting the model coeffi-
cients in the utility function. In the high noise scenario, parameter
coefficients on each of the explanatory variables are assumed to
be (1,  1, 1, 1). By holding the random component’s error term
constant, a “low noise” scenario is also created when doubling the
model coefficients to (2,  2, 2, 2), which relatively decreases the
contribution of the random component on the overall utility. Cus-
tomer attributes Sn are omitted in the utility function for simplic-
ity. Choice response for each individual customer is determined
by choosing the product alternative that maximizes the individual
utility Unk.
4.3 Mining the Simulated Choice Sets Data. Using the
simulated choice set and choice response data, a training set and a
testing set are formed: the first 5000 half choice observations as
well as the corresponding true choice sets data are used to learn
product associations and customer consideration frequencies. Pre-
dictions of choice sets are carried out for the second 5000 half
choice observations where the choice sets are assumed to be
unknown. Using the lift association analysis introduced in Sec.
2.2, 1626 pairs of relations are identified, among which 285
(17.53%) links with a value below 1 are removed from the net-
work to reduce the noises embedded in the data. To identify prod-
uct communities, the Newman’s optimal modularity method [41]
is employed and solved using a greedy algorithm [51] in R envi-
ronment with the igraph package [52]. The algorithm identifies
three product communities and one isolated node within the 60
considered product alternatives. Since customer attributes Sn are
not considered in this choice model, all customers are treated
identically and combined into one single cluster.
4.4 Prediction of Choice Sets for Simulated Data. Follow-
Following the approach described in Sec. 3.2, the choice set sam-
pling process proceeds by computing the customer-specific
product consideration probabilities CPnk (k0 ) in Eqs. (6)–(9). Once
the sampling distribution is determined, alternative products are
drawn sequentially to generate the predicted choice sets. The num-
ber of sampled products for each choice set is fixed at 12, which is
determined by the average choice set size from the training data.
The process is repeated for every customer in the test data.
4.5 Estimation of Parameter Bias for Choice Models. To
assess the effectiveness of the predicted choice sets for improving
JULY 2015, Vol. 137 / 071410-5
 choice modeling, we use the mean absolute percentage error
(MAPE) to compute the bias of the estimated model parameters,
as in Ref. [45]
 
R ^ 
100% X br  br 
MAPE ¼   (11)
R r¼1  br 
The MAPE metric assesses how good (on average) the estimated
model parameter b^r is relative to the target true parameter br,
averaged over the total number of model parameters (R ¼ 4 in the
example). The b^r is determined by the maximum likelihood crite-
rion using 5000 test data together with the specified or predicted
choice sets. With all other factors being controlled, the discrepan-
cies in parameter estimates are only associated with the specifica-
tion error of choice sets. Although MAPE does not take into
account the standard error of the parameter estimates, we note that
in this particular case all parameter estimates are statistically sig-
nificant and the impact of standard error is trivial.
The MAPE is computed for four multinomial logit choice mod-
els with different choice set structures for comparison, including
(1) the true choice set model; (2) the universal choice set model
[20], which utilize the full set of 60 alternatives; (3) the random
choice set model, which samples the alternatives from a uniform
distribution; and (4) the predicted choice set model using the pro-
posed approach. To consider the sampling uncertainties in gener-
ating the choice sets for Model 3 and Model 4, the b^r for Models
3 and 4 are computed as the sample average of 100 experiments,
including 100 times of choice set generations and 100 times of
model estimations. The sample variances for all b^r s are found to
be small (104–105) and thus not reported. For a fair compari-
son, the choice set size for the two models are equal to the aver-
aged true choice set size.
As the results shown in Fig. 4, Model 1 with the true choice
sets gives the smallest MAPE, meaning that the estimated parame-
ters are the “closest” to the true parameters among the four choice
models. For the other three models, Model 4 with the predicted
choice sets has a smaller MAPE, implying reduced bias and better
quality of its parameters. It is also observed that the size of the
error component has an impact on the performance of the pro-
posed approach. In the high noise scenario where the unobserved
uncertainty is relatively large, the bias reduction is less significant
(from 27.2% to 15.5%). In the low noise scenario where the ran-
dom component is small relative to the systematic component, the
bias reduction is more considerable (from 25.6% to 10.8%). This
suggests that the proposed approach is more capable of generating
consistent model estimates when the uncertainty of choice utility
is reduced.
Although parameter error is not the exact model error, values of
the estimated parameters inform the product utility, and thus
directly influence customers’ purchase decisions afterwards. In
this synthetic example, the customer heterogeneity is not
Fig. 4 Bias quantification of estimated choice models under
two noise scenarios
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explicitly modeled even though it can be considered using the
mixed logit technique by modeling br as random parameters. Our
mixed logit test shows that the concluded benefit of using the pro-
posed choice set generation approach for reducing the parameter
bias in model estimation is still valid. In the case study of vehicle
choice problem presented next, customer heterogeneity is consid-
ered by introducing the customer profile attributes as model
inputs.
5 Case Study of Vehicle Choice
In the second case study, we apply the proposed approach to
two sets of actual vehicle data for choice modeling. The primary
data source is the 2007 Vehicle Quality Survey from JDPA. The
choice set information is obtained by asking customers to report
exactly three other vehicles that they seriously considered, in
addition to the final purchase choice. The dataset used for this
study contains 7279 nation-wide respondents who purchased over
262 different vehicles. Data of customer profile attributes S,
including the sociodemographics and the usage context attributes
(e.g., local/highway usage, miles driven daily), are collected at
individual level.
For the purpose of validation, we divide the JDPA survey data
into 70% for training and 30% for validation. The training set is
used to identify the vehicle association network and customer
clusters, while the validation set is used to examine the prediction
quality of choice sets. In addition to the JDPA choice set data, the
NHTS is used as the second data source for predicting choice sets
and fitting choice models. The data presented in the case study
contain a sample population of 13,802 respondents from Califor-
nia with vehicles purchased in brand-new conditions during
2002–2009. NHTS data include a similar set of information as
JDPA data on customer demographics, vehicle ownership, and
vehicle usage, but the choice set information on which vehicle(s)
a respondent considered before purchasing was not collected.
Among the 217 vehicle models involved in the NHTS data, 200
vehicle models are mentioned at least once by respondents in
JDPA survey. Since most of the vehicle alternatives are the same
in both datasets, the JDPA data are an ideal source for learning
and predicting choice sets for NHTS data.
5.1 Network Association Analysis
5.1.1 Network Visualization and Graphical Analysis of the
Vehicle Data Sets. We begin our discussion by showing the topo-
logical properties of the constructed product association network
generated with the training data (JDPA data). Examining the char-
acteristics of this network helps us understand the nature of asso-
ciations as well as the market structure. In the lift analysis, we
find 16,166 pairs of relations, meaning that 47.3% of the pairs of
vehicle models are coconsidered at least once from the data.
Despite the large number of vehicles involved, only 11,006
(15.1%) of the identified relations are significant with a lift value
greater than 1. As such, the actual vehicle data reveals more ran-
domness in terms of the association relations compared to the syn-
thetic dataset examined in Sec. 4. Figure 5(a) shows the histogram
of the pruned link strength along with a fitted power-law curve.
The heavy-tailed distribution suggests that only few pairs of prod-
ucts are strongly associated while the association rules for most of
the vehicle alternatives are not highly evident.
In the network analysis, the degree of a node is defined as the
number of links it has to other nodes. Conceptually, it can be
interpreted as a measure of importance of the node in a network,
also known as the degree centrality [35]. In the vehicle association
network, the existence of products with a high-degree centrality
means that they are often considered with a broad range of
vehicles in a choice set. Figure 5(b) summarizes the degree distri-
bution of the product association network. This network exhibits
the scale-free property that nodes are not uniformly linked but are
congregated around a few “centered” products. This suggests that
Transactions of the ASME
 Fig. 5 Frequency distribution of network statistics: (a) link strength and (b) node degree
the average product is considered infrequently with the majority
of its neighbors, and frequently with only a few in the market. To
better understand the structural implications in a product associa-
tion network, we compared the products with high centralities to
the products with high occurrence frequency in choice sets. The
overlap rate of the top-30 vehicles in terms of node degrees (cen-
trality) and occurrence frequency is 50.0%. This indicates the
products that are widely considered are not necessarily the most
popular alternatives in choice sets. The most compared-against
vehicle model is “Nissan Altima,” which has been compared at
least once to other 117 vehicle models. Toyota Camry and “Honda
Accord” are the top two vehicle models in terms of the frequency
of occurrence in choice sets. “Toyota FJ Cruiser” and “Toyota
Avalon” are two of the top-10 vehicle models in degree centrality,
but they are not on the top-30 most considered vehicles based on
the training set of the JDPA data.
Figure 6(a) provides a visualization of the processed network,
where different colors stand for multiple vehicles communities
identified. The layout of the network is optimized using the
Fruchterman–Reingold algorithm [46], where nodes are posi-
tioned in an aesthetically pleasing way, but not inversely propor-
tional to the strength of link. The network comprises a giant
interconnected component and 17 isolated nodes. The presence of
isolated vehicle alternatives is caused by its low frequency of
occurrence in choice sets and its random association pattern to
other vehicles. As noted, this vehicle association network has a
remarkably low density (0.075), while other network statistics are
comparable to a typical social network of the same size [47].
Fig. 6 Vehicle association network with colored communities
and structural properties: (a) network derived using training
choice sets and (b) network derived using predicted choice
sets
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The above analysis presents the advantages of using network
techniques to simultaneously measure the association of 262 car
models based on the customer data. Beyond traditional association
analysis, the network technique allows us to analyze and visualize
a large number of product alternatives, and thereby provides us
with a better visual understanding of the positions and roles of
various products in a market. Furthermore, commonality and
differences of the product features within and across product com-
munities can be further examined to draw insights into noncom-
pensatory criteria customers use and guide product designs.
5.1.2 Vehicle Community Structure in a Weighted Network.
To further explore the vehicle association structures, we inspect
the community of vehicles considered frequently together within
a group but less frequently with other groups of vehicle models.
Six communities are identified within the large interconnected
component, as shown in Fig. 6(a) with different colors. The com-
munity size varies from 10 vehicles (3.8% of total vehicles) to 78
vehicles (29.8% of total vehicles). The type of vehicles falling
into each identified community is listed in Table 2. For example,
community C-1 contains 56 vehicles among which 39 are passen-
ger cars (CAR) and 17 are sport utility vehicles (SUV). By con-
trast, multiactivity vehicles (MAV) dominate the community C-2
over other types of vehicles. This implies that the grouped vehicle
communities show a highly organized structure in terms of vehicle
types, but sometimes customers do consider different types of
vehicles together. Similar analysis can be performed on other ve-
hicle features to study the importance of vehicle features in cus-
tomer’s consideration process.
5.1.3 Customer Segments. In customer clustering, seven cus-
tomer profile attributes S, including five sociodemographic attrib-
utes and two usage context attributes, are extracted for each
customer from the training data. Note that “Gender” is coded as 1
for male and 2 for female, and all other attributes are coded by
their numeric levels. All of the variables are standardized (cen-
tered to zero and scaled by dividing its standard deviation) before
clustering. The K-means algorithm [48], a basic unsupervised
clustering method, is used for customer clustering. Eight clusters
are identified that achieve a good balance between the classifica-
tion quality and the model efficiency.
Table 3 shows the cluster size and the cluster mean values of
the standardized customer profile variables S. The identified clus-
tering pattern shows both the customer heterogeneity and the cor-
relation between different profile attributes. For example,
customers in cluster G-5 are older people with small family size,
while customers in cluster G-6 tend to have higher income and
higher education level. To extract more useful patterns from the
customer cluster data, other statistical techniques, such as post-
clustering methods and discriminant analysis techniques, can be
performed to identify key customer characteristics that differenti-
ate the clusters.
JULY 2015, Vol. 137 / 071410-7
 Table 2 Vehicle choice set community

Choice set community no. Size % of total vehicles (%) CAR MAV MINI CAR MINI-VAN PICKUP SUV

C-1 56 21.4 39 0 0 0 0 17
C-2 78 29.8 7 69 0 0 2 0
C-3 48 18.3 30 11 0 0 0 7
C-4 42 16.0 22 3 9 1 0 7
C-5 10 3.8 0 0 0 10 0 0
C-6 11 4.2 0 0 0 0 11 0
Isolates 17 6.5 5 5 0 1 4 2
Total 262 103 88 9 12 17 33

is performed based on the customer-specific product consideration

Fig. 7 Examples of customer heterogeneity in choice set pref-
erence. CF and CP for customers purchased the same Hyundai
Entourage but belong to different clusters.
As an example of showing how customer heterogeneity is con-
sidered in choice set prediction, we present in Fig. 7 the relative
consideration frequency (CFnk) and the consideration probability
(CPnk) for two customers who purchased Hyundai Entourage (in
community C-5) but belong to different customer clusters. Com-
munity C-5 is characterized by midsize minivans with price rang-
ing from $21 k to $31 k. As indicated by CF, customers
characterized by high income and high education (G-6) consider
high-class expensive minivans more frequently than other cars,
e.g., Car 6 (Honda Odyssey), Car 8 (Nissan Quest), and Car 9
(Toyota Sienna). Customers with smaller family size (G-5) prefer
cheaper minivans and have lower expectation in size, e.g., Car 2
(Chrysler Town & Country) and Car 4 (Dodge Grand Caravan).
Taking into account the co-occurrence probability of two vehicles
in a choice set, the consideration probability CP is developed by
modifying CF using the association strength between vehicles
(Eqs. (7) and (8)). As noted, even though Car 4 (Dodge Grand
Caravan) is frequently considered by customers in G-5, its low co-
occurrence with the purchase choice Hyundai Entourage leads to
a low consideration probability CP for sampling in prediction.
5.2 Predicting Individual Choice Sets Within J.D. Power
data. For measuring the prediction quality of choice sets, we use
a hold-out sample in JDPA data to implement the prediction strat-
egy. The choice set for each respondent n is predicted given the
information of customer profile Sn and the final purchase choice k.
Following the method presented in Sec. 3.2, the sampling process
probabilities defined in Eqs. (6)–(9). An example of how a choice
set is generated is given as follows. Take a senior vehicle buyer
who belongs to customer cluster G-5 as an example. Given the
fact that he selected a “Honda CR-V” in his final purchase, it is
detected from the established association network that Honda CR-
V falls into the vehicle community C-2 with 78 vehicles in total.
This means that the sampled vehicles will be restricted to the ones
in that community. Following the sampling distribution consti-
tuted by the consideration probabilities in Eq. (8) that also takes
into account the link strength, three alternatives are sequentially
drawn probabilistically (e.g., “Nissan Xterra,” “Toyota High-
lander,” and “Toyota RAV 4”) in addition to the chosen vehicle
(Honda CR-V) to form the individual choice set.
5.3 Verification and Validation of the Predicted Choice
Sets. For this case study, we validate the proposed approach from
both in-sample (Sec. 5.3.1) and out-of-sample tests (Secs. 5.3.2
and 5.3.3). First, we examine the similarity of product association
rules between the training choice sets and the predicted choice
sets by observing their respective network topological properties.
We then present an accuracy measure at the aggregate level to
compare two matrices formed by the predicted choice sets and the
actual choice sets. Finally, we provide the hit-rate information at
the individual level between the predicted choice sets and the
actual choice sets.
5.3.1 Verification of Association Rules in the Predicted
Product Association Network. The derived product association
network using the predicted choice sets and its topological proper-
ties are shown in Fig. 6(b). Compared to the association network
based on the training data in Fig. 6(a), the color profiles of the
two networks reveal remarkable similarities, implying the com-
munity compositions of the two networks are nearly identical. Sta-
tistics suggest that 91.6% of vehicle nodes own the same
community membership in the two networks, while most of the
mismatched color nodes are isolated nodes in the training net-
work. The differences of the two association networks can be
explained by the random treatment of isolated nodes in the predic-
tion strategy as a result of missing information of association
rules.
5.3.2 Aggregated Precision of the Predicted Choice Sets. To
evaluate the effectiveness of the predicted choice sets in matching

Table 3 Customer segments generated by K-means clustering based on S attributes

Customer cluster No. size Sgender Sage Sincome Schildren # Seducation Slocal/hwy usage Smiles driven daily

G-1 716 0.781 1.001 0.662 0.328 0.306 0.056 0.051

G-2 735 1.280 0.601 0.023 0.543 0.215 0.116 0.370
G-3 458 1.280 0.421 0.458 1.357 0.037 0.241 0.036
G-4 671 0.781 0.186 0.655 1.559 0.221 0.048 0.075
G-5 693 0.775 1.118 0.454 0.551 0.759 0.040 0.307
G-6 852 0.757 0.650 0.739 0.466 0.890 0.053 0.287
G-7 668 1.280 1.107 0.711 0.383 0.016 0.249 0.028
G-8 302 0.385 0.012 0.006 0.006 0.032 0.577 2.584

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 the true choice sets data at the aggregated level, we establish two
matrices formed by the predicted choice sets and the actual choice
sets, respectively. With dimension being equal to the number of
product alternatives (262  262), the matrix cell records the co-
occurrence frequency between each pair of products. We employ
the quadratic assignment procedures (QAP) [49] to test whether
the correlation between two matrices is statistically significant. As
a nonparametric technique, QAP does not rely on the assumption
of independence and is especially useful when the observations
being analyzed are not independent of one another [49]. We note
from our testing result that there is an observed positive correla-
tion of 0.6080 between the predicted choice set matrix and the
actual choice set matrix. If we pair the product alternatives ran-
domly for the predicted choice set matrix, the average value of
correlation is only 0.0002 over 5000 iterations of QAP permuta-
tion. This result suggests that there is a strong correlation between
the matrix formed by the predicted choice sets and the one by the
actual choice set, which means the two matrices are consistent
with each other. The fact that the correlation measure for the pre-
dicted choice sets differs significantly from a random result, fur-
ther confirms the effectiveness of the proposed generation
strategy.
5.3.3 Individual Precision of the Predicted Choice Sets. At
the individual customer level, we calculate the hit-rate metric as
the ratio of the hit size (total number of products predicted cor-
rectly) to the prediction size (total number of products for predic-
tion). Using the validation set of the JDPA data, the average hit
rate for the predicted choice sets is 13.05%, while the same metric
for random sampling is only 1.10%. Specifically, for the predicted
choice sets, only 0.1% of customers have all three vehicles cor-
rectly predicted; nevertheless, this number increases rapidly to
24.6% in which case at least 1 out of 3 vehicles are correctly
predicted. These figures indicate a significant improvement, while
a perfect match of individual choice sets is not expected due to
the stochastic nature of customer behavior [50]. In this study, the
hit rate accuracy is affected by the limited customer profile attrib-
utes. We expect the hit-rate accuracy will further increase when
more relevant customer attributes are collected, as richer customer
information can help better characterize and predict customer het-
erogeneity in the consideration behavior.
5.4 Choice Modeling With the Predicted Choice
Sets. Using the proposed sampling strategy in Sec. 3.2, the mined
results from JDPA data are used to predict choice sets for the
NHTS data where the choice set is unknown. Three vehicle alter-
natives are sampled for each individual choice set, in addition to
the purchase choice itself.
For discrete choice analysis, we compare three multinomial logit
(MNL) models using choice sets generated by different methods,
including the one generated by the proposed approach. The idea is
to study the effect of choice set compositions on the choice model
estimates and the overall goodness-of-fit. In each model, the spe-
cific structure of the individual choice utility follows Eq. (12). Al-
ternative specific constants for each vehicle are omitted to allow for
choice prediction of new vehicles in vehicle design
Wnk ¼ bA Ak þ bAS Ak  Sn ; if k 2 CSn (12)
The customer profile attributes S included in model estimation are
household income, number of children under 18, and fuel price at
the vehicle purchase year. The customer-desired product attributes
A are selected to include vehicle price, vehicle origin, vehicles
type, HEV indicator, footprint, mileage per gallon (MPG), and
horsepower. Vehicle origin and vehicle type are coded as a
sequence of dummy variables to classify a vehicle into certain

Table 4 Estimates from multiple MNL models with different choice set specifications using validation data

Model 1 Model 2 Model 3

MNL w/ universal MNL w/ randomly sampled MNL w/ predicted choice set

choice sets choice sets using the proposed method
Choice set size 217 4 4
No. of Obs 2,995,034 55,208 55,208
Log-likelihood (null) 4.53  107 1.17  107 1.17  107
Log-likelihood (model) 4.23  107 1.03  107 9.88  106
2
McFadden’s pseudo R 0.0664 0.1184 0.1532

Attributes
Aprice/Sincome 0.1921 (0.0004) 0.1998 (0.0005) 0.1183 (0.0007)
Vehicle origin (domestic as base)
AEuropean 0.2396 (0.0016) 0.0584 (0.0018) 0.0952 (0.0020)
AJapanese 0.6510 (0.0008) 0.5745 (0.0010) 0.9503 (0.0011)
AKorean 0.4043 (0.0019) 0.5090 (0.0022) 1.2703 (0.0021)
Vehicle type (car as base)
AMAV 0.0322 (0.0009) 0.0064 (0.0011) 0.2076 (0.0016)
Amini car 0.5957 (0.0025) 0.1938 (0.0031) 0.9573 (0.0029)
Aminivan 0.1212 (0.0016) 0.1712 (0.0020) 0.2620 (0.0033)
Apickup 0.5503 (0.0013) 0.5211 (0.0017) 0.4199 (0.0036)
ASUV 0.4696 (0.0018) 0.5090 (0.0019) 0.0522 (0.0024)
AHEV 2.8948 (0.0066) 2.1273 (0.0082) 1.8395 (0.0085)
AHEV  Sfuel price 0.6814 (0.0024) 0.7041 (0.0030) 0.7308 (0.0032)
Afootprint 1.4403 (0.0042) 0.8816 (0.0049) 1.6733 (0.0060)
Afootprint Schildren 0.8437 (0.0018) 1.0015 (0.0023) 0.8928 (0.0030)
AMPG 0.1616 (0.0001) 0.0496 (0.0001) 0.0368 (0.0001)
Ahorsepower 0.0036 (0.0000) 0.0035 (0.0000) 0.0032 (0.0000)

Note: All estimates are statistically significant at the 0.01 level.

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 categories. The vehicle dimension is represented through the foot-
print variable, which is essentially the product of vehicle length
and vehicle width. MPG and horsepower reflect the fuel economy
and peak performance of a vehicle, respectively. All models are
described using the same set of explanatory variables. The esti-
mated coefficients and their standard errors (in parenthesis) are
reported in Table 4.
Model 1 formulates a universal choice set model where the
choice set is composed of all 217 vehicle alternatives in NHTS
data. In model 2, three product alternatives are randomly drawn
from the 216 vehicles in addition to the chosen vehicle to form a
choice set of size four. In model 3, individual choice sets are pre-
dicted using the proposed approach, based on the association rela-
tions and customer preferences in the JDPA data. As noted, all
model estimates are statistically significant for the three MNL
models.
As observed, the estimated coefficients in model 2 with random
choice sets look similar to those from model 1 with the universal
choice set, with only one exception on MAV. This is not surpris-
ing, because based on the uniform conditioning property [17], a
small random set of alternatives drawn from the universal set will
produce consistent parameter estimates, as long as the estimated
choice model meets the independence of irrelevant alternatives
property. Compared to model 1, we also observed increased stand-
ard errors for coefficients in model 2.
As we focus on the individual predicted choice sets, model 3
provides the highest goodness-of-fit (0.1532) with coefficient esti-
mates being quite different from the other two models. Noticeable
declines are found in the coefficients on Korean, MAV, Minicar,
Pickup, and increases in price/income, SUV, and HEV. Intuitively,
the increase of coefficient for price/income can be explained by
the fact that customers are less concerned about the price in final
comparison if they have screened out most of unacceptable
vehicles in consideration. The increase of SUV coefficient sug-
gests that customers who considered this specific type of vehicle
is very determined to buy it when the choice set effect is explicitly
considered. Similarly, the coefficient of HEV implies that hybrid
vehicles are more attractive to those customers who actually
included hybrid vehicles in their choice sets.
Through model comparisons, we conclude that choice sets do
have an impact on choice model estimates. The model estimation
result confirms that the proposed method has the ability to restrict
choice set products to relevant alternatives when conducting dis-
crete choice analysis with large number of alternatives. The built
choice models can be used further to support engineering design
decisions by optimizing the vehicle attributes in the models.
6 Conclusions
In this paper, a data-driven network analysis approach is pro-
posed to mine the existing data of choice sets and then predict het-
erogeneous choice sets for individual customers in new choice
data where the choice set information is lacking. This network-
analysis based method is particularly useful when a large set of
choice alternatives exist, and the alternatives and customer profile
attributes largely overlap in the existing and new data sets. A
range of methods such as customer survey and on-line behavior
tracking can be used for data collection. In data mining, complex
product relations in choice sets are modeled as a large product
association network, in which link analysis and community detec-
tion are applied to extract a set of product association rules.
Customer systematic heterogeneity is analyzed using market seg-
mentation by developing homogenous customer profile clusters.
In prediction, individual-specific choice sets are probabilistically
generated from a sampling distribution which unites product asso-
ciation strength and communities, customer segments, and prod-
uct consideration frequencies. Since the sampling distribution for
choice set formation is probabilistic, random heterogeneity among
customer consideration sets is thereby taken into account. Two
examples are provided to illustrate and test the proposed
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approach. In both examples, the results of predicted choice sets
are used to estimate MNL models.
Our results from the two examples, one using synthetic data
and the other using real vehicle data, consistently indicate that the
proposed approach leads to promising results. In the first example,
we apply the approach to a simulated dataset with choice set data
generated by a priori consideration rules. As the true choice utility
function is prespecified in the simulation, we quantify the choice
model bias as a result of the misspecification of choice sets. By
comparing three choice models with different choice sets under
two noise scenarios, our simulation results confirm that choice
sets have a significant impact on the estimated model coefficients,
and the parameter bias of the estimated choice model is signifi-
cantly reduced with the predicted choice sets using our approach.
In the second example with actual vehicle data, we utilize network
topological properties to test the similarities of association
relations identified. We then evaluate an aggregated precision
metric of product associations using QAP permutations and an
individual-level precision metric for out-of-sample validity.
Finally, we demonstrate the process of transferring the data min-
ing results from the existing choice set data to a new dataset for
prediction. The model estimation result strengthens the point that
the prediction of individual choice set is useful for modeling com-
pensatory decisions on customer choice when a very large number
of product alternatives exist.
Our research also highlights the benefits and potentials of using
network techniques for understanding customer preferences in
product design. In particular, network analysis helps not only in
capturing implicit product relations but also in visualizing associa-
tion rules in an organized network graph. As a result, characteris-
tics of choice sets are summarized based on network topological
features rather than using a priori or intuitive basis of knowledge.
The ultimate goal of improving choice model estimation in en-
gineering design is to improve the quality of design decisions.
Compared to an MNL model with entire set of products or a small
random set of products as choice sets, the choice models built
using the predicted choice sets as input are more trustworthy. The
obtained choice models for the vehicle problem demonstrate the
potential of using such models to support engineering design deci-
sions as vehicle attributes are explicitly included as model inputs.
More vehicle engineering design attributes can be introduced into
the choice model in addition to those included in this paper. Com-
parison with methods that employ heuristic rules for choice set
prediction can also be considered. The derived information of
product associations is not only useful for choice modeling, but
can also be used to derive market segments in designing products
like product family. To further evaluate the performance of the
proposed approach, different forms and structures of choice mod-
els will be tested and used in design applications.
Acknowledgment
Partial support to Mingxian Wang’s research from the Design
Cluster fellowship at Northwestern University is greatly appreci-
ated. We are also grateful to the support from the National Sci-
ence Foundation, Engineering Design program, CMMI-1436658.
Nomenclature
Ank ¼ customer-desired product attributes of product k by
customer n
Ck ¼ network community for product k
CFnk (k0 ) ¼ co-consideration frequency of a product k0 for
customer n who purchased product k
CPnk (k0 ) ¼ customer-specific product consideration probability
of a product k0 for customer n who purchased product
k
CSn ¼ choice set for individual customer n
FGn (k0 ) ¼ relative consideration frequency for a product k0 by
customers in cluster Gn
Transactions of the ASME
 Gn ¼ customer cluster for individual customer n
HEV ¼ hybrid electric vehicle
JDPA ¼ J.D. Power vehicle survey
Lij ¼ network link strength between product i and product j
MAPE ¼ mean absolute percentage error
MAV ¼ multi activity vehicles
MNL ¼ multinomial logit
NHTS ¼ National Household Travel Survey
QAP ¼ quadratic assignment procedures
Sn ¼ customer profile attributes
Unk ¼ customer choice utility of alternative k by customer n
Wnk ¼ observed part of the customer choice utility of alter-
native k by customer n
b ¼ discrete choice model parameter in customer’s utility
function
enk ¼ unobserved part of the customer choice utility of
alternative k by customer n
U1 ¼ quantile function of the standard normal distribution
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