Market Simulation is an Artificial Intelligence (AI) tool that predicts how Customers will make Product Purchase decisions.
An agent-based model is used to run the Market Simulation. Each Virtual Customer acts as an 'Intelligent Agent' and makes Purchase decisions based upon their different Willingness To Pay (WTP) for each Product in the Market. All of the WTP values are found in the 'Input WTP Matrix' while all of the other Product details are found in the 'Input Product Array'.
There are several ways to calculate Willingness To Pay (WTP) and include it in the Market Simulation. One way is through a Conjoint Analysis study. A second way is by calculating WTP based upon Customer Behavior, such as with an upstream 'Clickstream Conjoint' node. A third way is by estimating the 'Horizontal Differentiation' and 'Vertical Differentiation' of each Product Feature using a combination of upstream 'Differentiation Horizontal' nodes and 'Differentiation Vertical' nodes, along with an upstream 'Product Generator' node.
The Simulate Market node will predict the total Quantity of Products sold by first calculating the Consumer Surplus of each individual Customer. Customers will select the Product that gives them the greatest Consumer Surplus, where Consumer Surplus equals WTP minus Price. In addition to calculating Quantity sold, the Simulate Market node will also calculate the Market Share, Revenue, and Profit of each Product in the Market.
The Simulate Market node can be used to tune a Market Simulation so that it can accurately predict a real-world Market. When the Simulate Market node sits between a 'Tuning Loop Start' node and a 'Tuning Loop End' node, a Quantity Error can be calculated. The Tuning Loop can then change the Input Parameters to improve the accuracy of the predictions.
Note that this Market Simulation node offers two ways to handle identical Products. When the option 'Output Detailed Customer Results' is checked (default), then Customers will Purchase identical Products in roughly even proportions. But when the option 'Output Detailed Customer Results' is unchecked, then Customers will select the first identical Product found in the 'Input Product Array'. However, an upstream 'Product Generator' node will automatically add a tiny random tie-breaker to all values in the Output WTP Matrix. This will ensure that Customers Purchase identical Products in roughly even proportions regardless of the 'Output Detailed Customer Results' selection.
More Help: Examples and sample workflows can be found at the Scientific Strategy website: www.scientificstrategy.com.
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To use this node in KNIME, install the extension Market Simulation nodes by Scientific Strategy for KNIME - Community Edition from the below update site following our NodePit Product and Node Installation Guide:
A zipped version of the software site can be downloaded here.
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