The psychologist Barry Schwartz‘s book The Paradox of Choice (here’s his TED talk on the topic) was, for me at least, very persuasive. It made a compelling if counterintuitive argument: even though many people (economists especially) argue that more choice is almost always a good thing, Schwartz argued that too much choice is actually a bad thing, causing decision paralysis and unhappiness. That’s a simplistic rendering of Schwartz’s argument — there’s an obvious difference between having a lot of political candidates to choose from in an election and having a lot of flavors of jam to choose from in a supermarket — but that’s the gist.
Here’s how Schwartz describes the very memorable jam study, by the psychologists Mark Lepper and Sheena Iyengar:
When researchers set up [in a gourmet food store] a display featuring a line of exotic, high-quality jams, customers who came by could taste samples, and they were given a coupon for a dollar off if they bought a jar. In one condition of the study, 6 varieties of the jam were available for tasting. In another, 24 varieties were available. In either case, the entire set of 24 varieties was available for purchase. The large array of jams attracted more people to the table than the small array, though in both cases people tasted about the same number of jams on average. When it came to buying, however, a huge difference became evident. Thirty percent of the people exposed to the small array of jams actually bought a jar; only 3 percent of those exposed to the large array of jams did so.
Perhaps this result simply confirmed my personal bias, but it did resonate with me, and I often think of the jam experiment when I venture into a store — and, also often, promptly walk out without buying anything if the choice set is too large.
So it was a bit surprising to read Tim Harford‘s column here, in the Financial Times, which argues that the “paradox of choice” may not be real at all. Harford builds his case on both the profit-maximizing behavior of real firms as well as continuing research in the field:
It is hard to find much evidence that retailers are ferociously simplifying their offerings in an effort to boost sales. Starbucks boasts about its “87,000 drink combinations”; supermarkets are packed with options. This suggests that “choice demotivates” is not a universal human truth, but an effect that emerges under special circumstances.
Benjamin Scheibehenne, a psychologist at the University of Basel, was thinking along these lines when he decided (with Peter Todd and, later, Rainer Greifeneder) to design a range of experiments to figure out when choice demotivates, and when it does not.
But a curious thing happened almost immediately. They began by trying to replicate some classic experiments — such as the jam study, and a similar one with luxury chocolates. They couldn’t find any sign of the “choice is bad” effect. Neither the original Lepper-Iyengar experiments nor the new study appears to be at fault: the results are just different and we don’t know why.
After designing 10 different experiments in which participants were asked to make a choice, and finding very little evidence that variety caused any problems, Scheibehenne and his colleagues tried to assemble all the studies, published and unpublished, of the effect.
The average of all these studies suggests that offering lots of extra choices seems to make no important difference either way. There seem to be circumstances where choice is counterproductive but, despite looking hard for them, we don’t yet know much about what they are. Overall, says Scheibehenne: “If you did one of these studies tomorrow, the most probable result would be no effect.” Perhaps choice is not as paradoxical as some psychologists have come to believe. One way or another, we seem to be able to cope with it.
It is of course important to make a distinction between choice and complexity. One reason behind the smart nudge of having new employees at a company be automatically enrolled in a 401(k) plan is that the stack of paperwork and the large, complex set of options will turn some employees off from joining if left to their own devices.
But asking someone who knows nothing about investing to suddenly think about asset allocation, to choose between fixed-income and equity products, between value and growth funds, etc., is a lot more complex than asking her to choose between strawberry jam and marmalade. So even if jam studies of the future prove inconclusive, it still seems wise to streamline choices whose complexity might otherwise hamper a good outcome.
(Hat tip: Marginal Revolution)
and 
. You can also watch it on 
When it comes to big-ticket items (to me, that means a few hundreds of dollars or more), I find myself slipping into analysis/paralysis when faced with a myriad of choice. Cell phones, both the plans and the phones themselves, spring to mind. My last upgrade involved maybe 10 hours of research. Why? Getting stuck with the “wrong” phone (price or features) can be a costly mistake over the life of that phone.
Vacations also come to mind as something with tremendous choice and expense, and I’ll spend many hours on the difficult task of trying to judge the relative merits of highly disparate offerings.
Choosing between many cookies or jams (or even more, bottles of wine) does not phase me too much because the downside of picking “wrong cookie” is very contained.
Actually, Starbucks is only offering one choice–coffee*, in a few different sizes. The jam maker must produce 24 varieties, in 24 packages (or 48 or 72 if they offer two or three sizes), with labels, lids, etc. Those who go to Starbucks generally know what they want to order and how to order it before they get to the counter.
Meanwhile, I’m going to get a grande extra hot soy with extra foam, split shot with a half squirt of sugar-free vanilla and a half squirt of sugar-free cinnamon, a half packet of splenda, oh and put that in a venti cup and fill up the “room” with extra whipped cream with carmel and chocolate sauce drizzled on top
*OK, tea and hot chocolate too
We could do an experiment… let’s have one Starbucks just like it is now, and another Starbucks which explicitly lists their 87,000 drink choices on a menu. (On a very large wall with very small print. Provide binoculars for customers to read it.) That should at least start to clarify what we mean by “choice”.
That is one reason Costco is successful is they carry about 1/10 the SKUs of Wal-Mart. The choices are limited, but I don’t have to spend time over-analyzing. European grocery stores (at least in my experience) suffer from too little choice.
I always remember the scene from “Moscow on the Hudson” when Robin Williams’ character (Vladimir Ivanov) went into the supermarket and had a panic attack because he had too many products to choose from.
Most people historically like a small number of jam flavors. Strawberry, Raspberry & Grape probably take a 80% collective market share. Introducing an experiment with 6 jams, and I am sure that those three were proabably 3 of the 6, creates an environment where 50% of the choices are familiar. So when a customer walks up to the Jam counter the outcome of “That jam taste good, I should buy jam” is 50.
However introducing 24 jams is a different scenario. Now this time the odds of a customer picking a jam that is familiar is now down to 12.5%. And in this scenario, when presented with 24 jams, they probably are not going to jump for the most familiar, but rather try the crazy one. Giving them a higher chance to go “Ewwww, I think I will pass on Jam today.” I would take 50% over 12.5% any day.
I am not sure that the outcome of “Hmmm…. There are just so many choices, I think that I am confused and will move on” is as prevalent as originally thought. It is more likely that the odds of picking a gross jam were greater in experiment two.
It’s certainly true that when I am invited to two fun events on the same day and have to turn down one, it makes me sad, whereas to only get invited to one would make me very happy. Not a perfect analogy, but often I wish I had less choice when it comes to my social life because I’m always turning things down that I can’t go to.
It comes down to the sometimes contentious relationship between Good and Best. We all know that Best does not imply Good, but in some cases people actually would actually prefer being Best to being Good.
Sports are probably the best analogy of this. It is possible to have a very good team that wins most of its games, but good doesn’t matter if there is one team better than you. If you ask most fans or players they would probably prefer playing worse if it meant being the best and willing the game/event/championship.
This is also why so many people prefer economic and tax policies that concentrate wealth. A more even distribution of wealth would result in a much bigger “pie” at the end of the day making everyone better off in absolute terms. However if you give people a choice between having a net worth of $100 when their neighbors have $95 vs having $50 when their neighbors only have $5 most people prefer the latter. You don’t feel rich unless your neighbors are poor. It is better to be the best than it is to be better.
So this all comes around to the paradox of choice. Without choice one will BY DEFAULT always make the optimum decision. There will be no regret if there exists no alternative to compare your course of action to. Ignorance is bliss. Every time you look back and wonder how you managed to get by w/o a mobile phone or computer or a car that broke down every month and only went 150 miles between fill-ups, just remember that you got along fine because you were doing the best you could for yourself at the time.
Of course one always always has some sort of choice. Except in the case of torture or drugs or brain washing one can choose not to engage in some action and therefore will be exposed to all of the regretful feelings as before. I guess its a round about way of saying that a perfect automaton is in a perfect state of happiness.
Regarding becoming paralyzed by choice, choice imparts a cost to the consumer of performing an analysis of the choices and trying to model which one will produce the greatest benefit. Often times the process of choice has built in trial and error segment. Other times it involves research and getting data points from other people. Depending on the context the risk of making a bad choice will outweigh the benefit. With 24 jams there are more possibilities that one might pick a jam they will dislike and those waste their money. If determining which jam will not be a wrong choice has a high cost the person will CHOOSE not to take the risk and then CHOOSE to spend their money on something else. When the market participants have more information immediately at hand the paradox of choice effect will fade away.
The flaw in the original experiment is pretty obvious to anyone that shops in Whole Foods or Costco: a taster isn’t necessarily a buyer.
As a serial taster in the stores I visit, I always try as much as I can, just out of curiosity. Sometimes that becomes a purchase, but I’m in the grocery with items in mind – it’s rare that I buy something immediately because of a store tasting. Instead, it gets put on a list of things to think about buying in the future.
If they did the same experiment in a jam store, the results would be more valid – people are actually going there to buy jam.
Also, the existence of bookstores would sort of obviate their results. There are very few bookstores with 10 books.