IDEAS home Printed from https://ideas.repec.org/a/inm/ormksc/v29y2010i3p507-524.html
   My bibliography  Save this article

When More Alternatives Lead to Less Choice

Author

Listed:
  • Dmitri Kuksov

    (Washington University in St. Louis, St. Louis, Missouri 63130)

  • J. Miguel Villas-Boas

    (Haas School of Business, University of California, Berkeley, Berkeley, California 94720)

Abstract

This paper shows that when the alternatives offered to consumers span the preference space (as it would be chosen by a firm), search or evaluation costs may lead consumers not to search and not to choose if too many or too few alternatives are offered. If too many alternatives are offered, then the consumer may have to engage in many searches or evaluations to find a satisfactory fit. This may be too costly and result in the consumer avoiding making a choice altogether. If too few alternatives are offered, then the consumer may not search or choose, fearing that an acceptable choice is unlikely. These two forces result in the existence of a finite optimal number of alternatives that maximizes the probability of choice.

Suggested Citation

  • Dmitri Kuksov & J. Miguel Villas-Boas, 2010. "When More Alternatives Lead to Less Choice," Marketing Science, INFORMS, vol. 29(3), pages 507-524, 05-06.
    • Handle: RePEc:inm:ormksc:v:29:y:2010:i:3:p:507-524
    DOI: 10.1287/mksc.1090.0535
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mksc.1090.0535
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mksc.1090.0535?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 164-187, February.
    2. Stigler, George J., 2011. "Economics of Information," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 5, pages 35-49.
    3. David K. Levine & Drew Fudenberg, 2006. "A Dual-Self Model of Impulse Control," American Economic Review, American Economic Association, vol. 96(5), pages 1449-1476, December.
    4. J. Miguel Villas-Boas, 2004. "Communication Strategies and Product Line Design," Marketing Science, INFORMS, vol. 23(3), pages 304-316, January.
    5. Faruk Gul & Wolfgang Pesendorfer, 2001. "Temptation and Self-Control," Econometrica, Econometric Society, vol. 69(6), pages 1403-1435, November.
    6. Keller, Kevin Lane & Staelin, Richard, 1987. "Effects of Quality and Quantity of Information on Decision Effectiveness," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 14(2), pages 200-213, September.
    7. Roland Benabou & Jean Tirole, 2004. "Willpower and Personal Rules," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 848-886, August.
    8. Jacoby, Jacob & Speller, Donald E & Berning, Carol A Kohn, 1974. "Brand Choice Behavior as a Function of Information Load: Replication and Extension," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 1(1), pages 33-42, June.
    9. Simon P. Anderson & Regis Renault, 1999. "Pricing, Product Diversity, and Search Costs: A Bertrand-Chamberlin-Diamond Model," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 719-735, Winter.
    10. Paul Klemperer & A. Jorge Padilla, 1997. "Do Firms' Product Lines Include Too Many Varieties?," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 472-488, Autumn.
    11. Ben Irons & Cameron Hepburn, 2007. "Regret Theory and the Tyranny of Choice," The Economic Record, The Economic Society of Australia, vol. 83(261), pages 191-203, June.
    12. Mitchell, Olivia S. & Utkus, Stephen P. (ed.), 2004. "Pension Design and Structure: New Lessons from Behavioral Finance," OUP Catalogue, Oxford University Press, number 9780199273393.
    13. Shugan, Steven M, 1980. "The Cost of Thinking," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 7(2), pages 99-111, Se.
    14. Brigitte C. Madrian & Dennis F. Shea, 2001. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(4), pages 1149-1187.
    15. Timothy Van Zandt, 2004. "Information Overload in a Network of Targeted Communication," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 542-560, Autumn.
    16. Loomes, Graham & Sugden, Robert, 1987. "Some implications of a more general form of regret theory," Journal of Economic Theory, Elsevier, vol. 41(2), pages 270-287, April.
    17. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 69(1), pages 99-118.
    18. Dmitri Kuksov, 2004. "Buyer Search Costs and Endogenous Product Design," Marketing Science, INFORMS, vol. 23(4), pages 490-499, May.
    19. J. Miguel Villas-Boas, 2009. "Product Variety and Endogenous Pricing with Evaluation Costs," Management Science, INFORMS, vol. 55(8), pages 1338-1346, August.
    20. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
    21. Liang Guo, 2009. "The Benefits of Downstream Information Acquisition," Marketing Science, INFORMS, vol. 28(3), pages 457-471, 05-06.
    22. John T. Gourville & Dilip Soman, 2005. "Overchoice and Assortment Type: When and Why Variety Backfires," Marketing Science, INFORMS, vol. 24(3), pages 382-395, July.
    23. Preyas S. Desai, 2001. "Quality Segmentation in Spatial Markets: When Does Cannibalization Affect Product Line Design?," Marketing Science, INFORMS, vol. 20(3), pages 265-283, August.
    24. Hauser, John R & Wernerfelt, Birger, 1990. "An Evaluation Cost Model of Consideration Sets," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 16(4), pages 393-408, March.
    25. Todd Sarver, 2008. "Anticipating Regret: Why Fewer Options May Be Better," Econometrica, Econometric Society, vol. 76(2), pages 263-305, March.
    26. Norwood Franklin B, 2006. "Less Choice is Better, Sometimes," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 4(1), pages 1-23, February.
    27. K. Sridhar Moorthy, 1984. "Market Segmentation, Self-Selection, and Product Line Design," Marketing Science, INFORMS, vol. 3(4), pages 288-307.
    28. Emir Kamenica, 2008. "Contextual Inference in Markets: On the Informational Content of Product Lines," American Economic Review, American Economic Association, vol. 98(5), pages 2127-2149, December.
    29. Stephen J. Hoch & Eric T. Bradlow & Brian Wansink, 1999. "The Variety of an Assortment," Marketing Science, INFORMS, vol. 18(4), pages 527-546.
    30. Steven M. Shugan, 1989. "Product Assortment in a Triopoly," Management Science, INFORMS, vol. 35(3), pages 304-320, March.
    31. Juanjuan Zhang, 2010. "The Sound of Silence: Observational Learning in the U.S. Kidney Market," Marketing Science, INFORMS, vol. 29(2), pages 315-335, 03-04.
    32. David A. Wise, 2004. "Perspectives on the Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise04-1, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. J. Miguel Villas-Boas, 2009. "Product Variety and Endogenous Pricing with Evaluation Costs," Management Science, INFORMS, vol. 55(8), pages 1338-1346, August.
    2. Liang Guo, 2016. "Contextual Deliberation and Preference Construction," Management Science, INFORMS, vol. 62(10), pages 2977-2993, October.
    3. Stefano DellaVigna, 2009. "Psychology and Economics: Evidence from the Field," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 315-372, June.
    4. Yan, Huan & Chang, En-Chung & Chou, Ting-Jui & Tang, Xiaofei, 2015. "The over-categorization effect: How the number of categorizations influences shoppers' perceptions of variety and satisfaction," Journal of Business Research, Elsevier, vol. 68(3), pages 631-638.
    5. Kohei Kubota & Mototsugu Fukushige, 2016. "Rational Consumers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57(1), pages 231-254, February.
    6. Nagler, Matthew G., 2015. "Trading off the benefits and costs of choice: Evidence from Australian elections," Journal of Economic Behavior & Organization, Elsevier, vol. 114(C), pages 1-12.
    7. Bing Jing, 2016. "Lowering Customer Evaluation Costs, Product Differentiation, and Price Competition," Marketing Science, INFORMS, vol. 35(1), pages 113-127, January.
    8. Malone, Trey & Lusk, Jayson L., 2017. "The excessive choice effect meets the market: A field experiment on craft beer choice," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 67(C), pages 8-13.
    9. Fernando Branco & Monic Sun & J. Miguel Villas-Boas, 2012. "Optimal Search for Product Information," Management Science, INFORMS, vol. 58(11), pages 2037-2056, November.
    10. Liang Guo & Juanjuan Zhang, 2012. "Consumer Deliberation and Product Line Design," Marketing Science, INFORMS, vol. 31(6), pages 995-1007, November.
    11. Anocha Aribarg & Neeraj Arora, 2008. "—Interbrand Variant Overlap: Impact on Brand Preference and Portfolio Profit," Marketing Science, INFORMS, vol. 27(3), pages 474-491, 05-06.
    12. Driscoll, John C. & Holden, Steinar, 2014. "Behavioral economics and macroeconomic models," Journal of Macroeconomics, Elsevier, vol. 41(C), pages 133-147.
    13. A. Ye(scedilla)im Orhun, 2009. "Optimal Product Line Design When Consumers Exhibit Choice Set-Dependent Preferences," Marketing Science, INFORMS, vol. 28(5), pages 868-886, 09-10.
    14. Ortoleva, Pietro, 2013. "The price of flexibility: Towards a theory of Thinking Aversion," Journal of Economic Theory, Elsevier, vol. 148(3), pages 903-934.
    15. Serguei Netessine & Terry A. Taylor, 2007. "Product Line Design and Production Technology," Marketing Science, INFORMS, vol. 26(1), pages 101-117, 01-02.
    16. Committee, Nobel Prize, 2017. "Richard H. Thaler: Integrating Economics with Psychology," Nobel Prize in Economics documents 2017-1, Nobel Prize Committee.
    17. Alan L. Montgomery & Kartik Hosanagar & Ramayya Krishnan & Karen B. Clay, 2004. "Designing a Better Shopbot," Management Science, INFORMS, vol. 50(2), pages 189-206, February.
    18. Lin Liu & Anthony Dukes, 2013. "Consideration Set Formation with Multiproduct Firms: The Case of Within-Firm and Across-Firm Evaluation Costs," Management Science, INFORMS, vol. 59(8), pages 1871-1886, August.
    19. Iyengar, Sheena S. & Kamenica, Emir, 2010. "Choice proliferation, simplicity seeking, and asset allocation," Journal of Public Economics, Elsevier, vol. 94(7-8), pages 530-539, August.
    20. Dmitri Kuksov & Yuanfang Lin, 2017. "Signaling Low Margin Through Assortment," Management Science, INFORMS, vol. 63(4), pages 1166-1183, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:29:y:2010:i:3:p:507-524. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.