Choice, Choice, Choice!

Barry Schwartz, a professor of psychology at Swarthmore College wrote an interesting article on why more is less. He argued:

"... [T]here is growing evidence that the emotional logic (the psycho-logic) is deeply flawed. Indeed, for many people, increased choice can lead to a decrease in satisfaction. Too many options can result in paralysis, not liberation..."

Albeit confusing, I for one, believe that (even too) many choices is good. Schwartz used some examples:

"...Sheena Iyengar and Mark Lepper, psychologists at Columbia and Stanford respectively, have shown that as the number of flavors of jam or varieties of chocolate available to shoppers is increased, the likelihood that they will leave the store without buying either jam or chocolate goes up. According to their 2000 study, Ms. Iyengar and Mr. Lepper found that shoppers are 10 times more likely to buy jam when six varieties are on display as when 24 are on the shelf.... In a study that Ms. Iyengar, Rachel Elwork of Columbia and I are working on, we found that as the number of job possibilities available to college graduates goes up, applicants' satisfaction with the job search process goes down. This is particularly true for job seekers whose aim is to get the "best possible" job — while people in this group receive more and better job offers than those who are aiming for "good enough" jobs, they also tend to be less satisfied with their career decisions than their less demanding counterparts. They are also more anxious, pessimistic, disappointed, frustrated and depressed.... In another study under way, Ms. Iyengar found that as the number of mutual funds in a 401(k) plan offered to employees goes up, the likelihood that they will choose a fund — any fund — goes down. For every 10 funds added to the array of options, the rate of participation drops 2 percent. And for those who do invest, added fund options increase the chances that employees will invest in ultraconservative money-market funds..."

I am not surprised. But take me as a counterexample. I noted there were so many old and new varieties of Coca Cola. Diet, strawberry, etc, etc. Yet, I stick with the original Coke, no matter what. Have I tried the others? Not necessarily. So why do I keep going with original Coke? Because I like it and I don't have any incentive to even try others. Easy. Schwartz should have told about taste. And those consumers in his example are simple yet real example of confused consumers. In fact they still can be modeled in economics. Just add an empty set as one of the alternatives for them and off you go.

As an aside, many choices means higher competition on the supply side (and demand side to some extent, but not as great). It will put downward pressure to the price. So those consumers in Schwartz examples might as well come back the next day buying whatever she ends up choosing but with lower price.