The problem (and joy) of overchoice

There is a great paradox between people wanting a lot of choices and actually being better of with fewer options. People seem to overestimate the fun of choosing and underestimate the costs of choosing and possibility of post-choice regret. There are many names for the phenomenon that too many choices lead to poorer decisions or failure to make a decision at all: paradox of choice, hyperchoice, overchoice, analysis paralysis.

There are several interesting researches done on this area. Iyengar & Lepper (2000)[i] was perhaps the first one to explore the size of opportunity set and its effect to choices. They made several interesting laboratory tests:  

• Jam test showed that people were more eager to taste different jams when presented a display of 24 flavors than 6 flavors, but they were more like to buy a jam, if presented only 6 options. Iyengar & Lepper (2000)
• Essay test revealed that students were more likely to write an essay for extra credit when they were provided a list of only 6 potential topics, rather than 30. Those students who wrote the essay, got better marks, if the selection was done from a smaller rather than a larger choice set. Iyengar & Lepper (2000)
• Chocolate test demonstrated that people enjoyed making a choice from the selection of 30 than from a display of 6 chocolates. However, people were more unsatisfied with their choices and regretted the choices more if the selection was done from a display of 30 chocolates rather than 6. People who chose from larger selection were also considerably less likely to choose chocolates rather than money as compensation for their participation. Iyengar & Lepper (2000)

The experiments clearly show that people are better of with smaller sets. Barry Schwartz popularized the overchoice phenomenon in his book The Paradox of Choice (2004). Chernev (2003)[ii] claimed that choosing from large assortment leads to weaker preferences than choosing from smaller one. Mick et al (2004)[iii] discusses the psychological costs of having to live in hyperchoice environment all the time. They claim also, that combination of hyperchoice and time-stress is extremely exhausting. Maxwell (2005)[iv] presents an empirical study on size of the opportunity set and the perceived fairness of the price. Su et al. (2009)[v] discusses the effect of the size of opportunity set on the degree of post-choice regret. The bigger the set is, the more there will be other forgone alternatives and possibilities that we have lost a better option. Iyengar & Lepper (2000)[vi] say that participants in the extensive-choice condition reported their decision-making process as being simultaneously more enjoyable, more difficult, and more frustrating.

Iyengar & Kamenica (2010)[vii] discuss previous research on how overchoice affects whether one consumes or not. They show that the size of opportunity set does not only determine whether one consumes or not, but it determines also what is consumed. In other words the choice varies, if the size of the opportunity set varies. They provide both laboratory data and field data from retirement investments and drug plans to support their argument. Iyengar & Lepper (2000)[viii] point out that there are choices with a lot of alternatives that do not lead to choice overload: If people have prior strong preferences they do not mind if the opportunity set is large. Due to the chooser's previous experience, these choices are perceived as limited in number – even if there are plenty in the reality.

In some research papers there have been attempts to define the optimal size of opportunity set. For example Maxwell (2005)[ix] argues that considering the concept of fairness of price and managerial costs three to seven choices is optimal. Miller (1956)[x] has written an interesting and much-cited paper in the information theory: “The magical number seven, plus or minus two: some limits on our capacity for processing information”. He argues, that people are typically not able to remember more than seven pieces of information at the same time. It is  difficult to imagine that there would exist an overall optimal number of choices. Wouldn’t it be more likely, if the the optimal number depended on what is to be chosen and on the other circumstances? Figure illustrates the benefits and disadvantages of different sizes of opportunity sets from the consumer point of view. Actually, the whole question of the optimal size is a philosophical one, since we consumers rarely can affect it.

If one considers all the options, the number of alternatives one confronts daily is quite obviously far “too many” in most decisions: What to eat today? How to spend the next holiday? Which media product to consume? In these questions the decisions costs would be tremendous, if one would actually consider all the options. It might happen that one has not been able to list all the options by the end of the day. Usually people do not consider all the options, but they form a much smaller consideration set. The decision is done from this set rather than the whole set. People also use clever shortcuts, heuristics, in their decision-making. We’ll manage!

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[i] Iyengar, S. S & Lepper, M. R. (2000): “When choice is demotivating: Can one desire too much of a good thing?”, Journal of Personality and Social Psychology 79 (6) (2000), pp. 995–1006.

[ii] Chernev, 2003 A. Chernev, When more is less and less is more: The role of ideal point availability and assortment in consumer choice, Journal of Consumer Research 30 (2003), pp. 170–183

[iii] Mick, David Glen & Broniarczyk, Susan M. & Haidt, Jonathan (2004): “Choose, Choose, Choose, Choose, Choose, Choose, Choose: Emerging and Prospective Research on the Deleterious Effects of Living in Consumer Hyperchoice”; Journal of Business Ethics, Volume 52, Number 2, p. 207-211.

[iv] Maxwell, Sarah (2005): “Hyperchoice and high prices: an unfair combination”, Journal of Product & Brand Management Volume: 14 Issue: 7

[v] Song Su  & Rong Chen & Ping Zhao (2009): “Do the size of consideration set and the source of the better competing option influence post-choice regret?”, Motivation and Emotion Volume 33, Number 3 / September, 2009

[vi] Iyengar, S. S & Lepper, M. R. (2000): “When choice is demotivating: Can one desire too much of a good thing?”, Journal of Personality and Social Psychology 79 (6) (2000), pp. 995–1006.

[vii] Iyengar, Sheena S. & Kamenica, Emir (2010): “Choice proliferation, simplicity seeking, and asset allocation” Journal of Public Economics ,94(7-8),p.530, Aug 2010

[viii] Iyengar, S. S & Lepper, M. R. (2000): “When choice is demotivating: Can one desire too much of a good thing?”, Journal of Personality and Social Psychology 79 (6) (2000), pp. 995–1006.

[ix] Maxwell, Sarah (2005): “Hyperchoice and high prices: an unfair combination”, Journal of Product & Brand Management Volume: 14 Issue: 7

[x] Miller, George A. (1956): “The magical number seven, plus or minus two: some limits on our capacity for processing information”, Psychological Review, Vol 63(2), Mar 1956, 81-97.