Choosing to Have Less Choice
AbstractThis paper investigates choice between opportunity sets. I argue that individuals may prefer to have fewer options for two reasons: First, smaller choice sets may provide information and reduce the need for the agent to contemplate the alternatives. Second, contemplation costs may be increasing in the size of the choice set, making smaller sets more desirable even when they do not provide any information to the agent. I identify which of these reasons drives individual behavior in a laboratory experiment. I find strong support for both the information and cognitive overload arguments. The effects do not disappear as participants gain experience with the task. Applications of these results include firms’ choices of product variety, as costs increase with the number of products offered, and the design of government policies, such as the Medicare Drug Discount Card Program, in which older citizens can choose among numerous cards for discounts in prescription drugs.
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Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2006.37.
Date of creation: Feb 2006
Date of revision:
Choice; Opportunity Sets;
Find related papers by JEL classification:
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-04-29 (All new papers)
- NEP-CBE-2006-04-29 (Cognitive & Behavioural Economics)
- NEP-DCM-2006-04-29 (Discrete Choice Models)
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