Reducing Choice Overload without Reducing Choice

Besedes, Tibor and Deck, Cary and Sarangi, Sudipta and Shor, Mikhael (2012): Reducing Choice Overload without Reducing Choice.

Abstract

Previous studies have demonstrated that a multitude of options can lead to choice overload, reducing decision quality. Through controlled experiments, we examine sequential choice architectures that enable the choice set to remain large while potentially reducing the effect of choice overload. A specific tournament-style architecture achieves this goal. An alternate architecture in which subjects compare each subset of options to the most preferred option encountered thus far fails to improve performance due to the status quo bias. Subject preferences over different choice architectures are negatively correlated with performance, suggesting that providing choice over architectures might reduce the quality of decisions.

• Item Type: MPRA Paper
• Language: English
• Keywords: choice architecture, choice overload, inertia, status quo bias, self-sorting, decision making, experiments
• Subjects: D - Microeconomics > D0 - General > D03 - Behavioral Microeconomics: Underlying Principles; C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior

References

Agnew, Julie, Pierluigi Balduzzi, and Sunden Annika (2003), “Portfolio choice and trading in a large 401(k) plan,” American Economic Review, 93(1): 193–215.

Besedeš, Tibor, Cary Deck, Sudipta Sarangi, and Mikhael Shor (2012), “Age Effects and Heuristics in Decision Making,” Review of Economics and Statistics, 94(2), forthcoming.

Hanoch, Yaniv, Stacey Wood, Andrew Barnes, Pi-Ju Liu, and Thomas Rice (2011), “Choosing the right Medicare prescription drug plan: The Effect of Age, Strategy Selection and Choice Set Size,” Health Psychology, 30(6): 719–727.

Heiss, Florian, Adam Leive, Daniel McFadden, and Joachim Winter (2012), “Plan Selection in Medicare Part D: Evidence from Administrative Data,” NBER Working Paper no. 18166.

Iyengar, Sheena S., and Mark R. Lepper (2000), “When Choice is Demotivating: Can One Desire Too Much of a Good Thing?” Journal of Personality and Social Psychology, 79(6): 995–1006.

Iyengar, Sheena S., and Wei Jiang (2000), “The Psychological Costs of Ever Increasing Choice: A Fallback to the Sure Bet,” Columbia University, mimeo.

Kool, Wouter, Joseph T. McGuire, Zev B. Rosen, and Matthew Botvinick (2010), “Decision Making and the Avoidance of Cognitive Demand,” Journal of Experimental Psychology: General, 139(4): 665–682.

Kahneman, Daniel, Jack L. Knetsch, and Richard H. Thaler (1991), “Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias,” Journal of Economic Perspectives, 5(1): 193–206.

Manzini, Paola and Marco Mariotti (2007), “Sequentially Rationalizable Choice,” American Economic Review, 97(5): 1824–1839.

McFadden, Daniel (1974), “Conditional Logit Analyses of Qualitative Choice Behavior,” in Paul Zarembka (ed.), Frontiers of Econometrics, pp. 105–142.

Oostendorp, Linda J.M., Petronella B. Ottevanger, Winette T.A. van der Graaf, and Peep F.M. Stalmeier (2011), “The Benefits of Discussing Adjuvant Therapies One at a Time instead of All at Once,” Breast Cancer Research and Treatment, 129(1): 79–87.

Payne, John W., James R. Bettman, and Eric J. Johnson (1993), The Adaptive Decision Maker, Cambridge University Press, Cambridge, UK.

Read, Daniel, and George Loewenstein (1995), “The Diversification Bias: Explaining the Discrepancy in Variety Seeking between Combined and Separated Choices,” Journal of Experimental Psychology: Applied, 1(1): 34–49.

Redelmeier, Donald A., and Eldar Shafir (1995), “Medical Decision Making in Situations that Offer Multiple Alternatives,” Journal of the American Medical Association, 273(4): 302–305.

Robert, Henry M. III, Daniel H. Honemann, and Thomas J. Balch (2011), Robert’s Rules of Order, 11th ed., De Capo Press, Philadelphia, PA.

Roswarski, Todd Eric, and Michael D. Murray (2006), “Supervision of Students May Protect Academic Physicians from Cognitive Bias: A Study of Decision-Making and Multiple Treatment Alternatives in Medicine,” Medical Decision Making, 26(2): 154–161.

Schram, Arthur, and Joep Sonnemans (2011), “How Individuals Choose Health Insurance: An Experimental Analysis,” European Economic Review, 55(6): 799–819.

Schwartz, Barry (2005), The Paradox of Choice: Why More is Less, Harper Collins, New York, NY.

Simon, Herbert A. (1956), “Rational choice and the structure of the environment,” Psychological Review, 63(2): 129–138.

Stroh, Linda K., Gregory B. Northcraft, and Margaret A. Neele (2008), Organizational Behavior: A Management Challenge, 3rd ed., Lawrence Erlbaum Associates, Mahwah, NJ.

Sunstein, Cass, and Richard H. Thaler (2003), “Libertarian Paternalism,” American Economic Review, 93(2): 175–179.

Tanius, Betty E., Stacey Wood, Yaniv Hanoch, and Thomas Rice (2009), “Aging and Choice: Applications to Medicare Part D,” Judgement and Decision Making, 4(1): 92–101.

Thaler, Richard, and Cass Sunstein (2008), Nudge: Improving Decisions About Health, Wealth, and Happiness, Yale University Press, New Haven, CT.