Application of potential method to survey analysis

Abstract

This paper examines an alternative method for analyzing a collection of Likert items in the multi-criteria decision framework. Likert items are compared in pairs and organized in a set of weighted digraphs which are aggregated according to the Potential Method rules. In combination with Factor Analysis this approach gives respondents’ preferences on the scale which approximates a measurable value function. As an application of
the proposed methodology, we examine a potential set of incentives and explore the degree to which they would be accepted by the industry. We use Potential Method to elicit firm’s preferences for given incentives and we seek to explain the difference in these preferences by the firm/market factors. Data is collected through a survey of 190 Croatian enterprises performed in 2002.