Alumni Update | Issue Four 2014

Decisions, decisions

Choice research's new global home at UniSA

Institute for Choice team
Even if they don’t realise it yet, every scientific discipline and professional industry has one burning question in common: how do we make decisions? The Institute for Choice is where the world goes for an answer – and it’s proud to call Australia home.

Launched in Sydney by the University of South Australia in February 2014, the Institute is the nerve centre for an unprecedented global network of academic expertise in choice research.
At the core is Professor Jordan Louviere, an internationally-renowned practitioner and pioneer of choice modelling, who founded the Institute and serves as a Research Professor.

“We have one of, if not the largest collection of people in the world who work in this field – which includes people here in Sydney, a large number of people in Australia affiliated with us, people in Europe, and people in North America,” Professor Louviere says.

While the practice of choice modelling only began to gather steam in the last few decades, the idea itself dates back to the 1920s and a man named Louis Leon Thurstone, who developed the Method of Paired Comparisons – one of the oldest social science theories.

Today, Professor Louviere points out that choice modelling has become a highly technical field, but the premise remains straightforward.

“Let’s take a simple example of going into a supermarket and looking at a cereal shelf: each of the cereals that are on this shelf has a brand name, a price, ingredients, they may have some additives, flavours, sugar or not – we refer to all those things as attributes of the products,” he explains.

“If we observe which of these cereals you choose, and we observe you doing this enough times with enough cereals, then we can work out statistically which attributes are the ones that are impacting on the choices you’re making.”

Alongside consumer-based research, the Institute for Choice also specialises in ‘non-market valuation’, or choice modelling applied to problems where a conventional marketplace is not involved.

Professor Louviere’s experience with this type of work has seen him develop emissions trading schemes, design sentencing programs for the UK Ministry of Justice, review how people respond to public transport proposals in Sydney, and explore health economics problems such as end of life decisions or alternative drug choices.

Non-market valuation is also regularly used to develop strategies in environmental economics and respond to environmental disasters, as Professor Louviere illustrates.

“If you have an oil spill and it damages the environment, there are components to that damage and remediation that can be done to fix it… (which is) a set of features that can be either set on or off, or set at particular levels,” he says.

“We don’t value oil spills in real markets – you can’t go into a store and buy an oil spill, or choose to fix an oil spill – so the question is, as we vary these aspects of oil spills, how do the choices change?”

“Once cost is involved in the process, then we can actually work out what people are willing to pay for each aspect of the remediation.”

Recent times have seen choice research draw strongly on multidisciplinary influences, as the practice is relied upon more widely.

Reflecting this, the Institute for Choice employs staff including engineers, physicists, economists, psychologists, transport and urban planners, marketers, and finance people. It also has close links with other UniSA research teams, including the world-leading Ehrenberg-Bass Institute for Marketing Science.

“What we’ve learned over the last 25 years is that any one discipline that tries to solve these problems sees them entirely through disciplinary eyes,” Professor Louviere says.

“They can’t really see the rest of the problem, because they weren’t trained to see it. So we put together inter-disciplinary teams to try and minimise that, and it’s been very successful for us.”

Besides cross-disciplinary growth, Professor Louviere anticipates more work in combining data from real markets and discrete choice experiments, and says the Institute has just begun undertaking this with a significant grant from the Social Sciences and Humanities Research Council in Canada.

“We’ll be looking at 6 different product categories, and studying the stability of the choices that a panel of people in the USA make over time,” he says.

“We’ll have access to all the choices these panellists are making in real markets in real stores, so we can cross-validate all the work we’re doing with what the people are actually doing.”

It’s an exciting start on an exciting new frontier in cross-disciplinary research.

Visit the Institute for Choice’s website at http://www.unisa.edu.au/Research/Institute-for-Choice/ for updates on its latest work – including a new joint research project with the World Bank, analysing youth unemployment and barriers faced by young people in labour markets worldwide.

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