Choice overload and contextual inference: An experimental test

The paradoxical finding of the preference for small sets of products (Iyengar and Lepper; 2000) has been explained with cognitive costs and regret. Instead, Kamenica (2008) suggests that the set size conveys a payo relevant information about the popularity of the products in a set: in small set there are the most popular products. The present experimental analysis aims to test if the contextual inference theory can explain the increased willingness to take a product from small sets; the experiment relies on the standard framework in experiments on choice overload: it is a between-subjects experiment where the willingness to purchase a product rather than accept a fixed monetary payment is compared in the two experimental conditions, that is when an extensive or a small choice set is provided to the participants. The new element with respect to previous studies on this topic is that the participants do not see the options in the set: the items are presented inside bags. The subjects can choose to take one product at random from the set or a fixed monetary fee; the choice is offered sequentially on three products: chocolate, yoghurt and crisps. This design rules out alternative explanations as cognitive costs and regret since the only information given is the set size. The results show that in two of the three product categories the proportion of people that prefer to take whatever product from the small set is higher than from the large one.