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Less Choice is Better, Sometimes

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  • Norwood Franklin B

    (Oklahoma State University)

Abstract

Psychological experiments have revealed that more choice does not always make one better off. For example, consumers are sometimes more likely to purchase a product from a small variety than a large variety. Some have suggested that this excessive-choice effect may have implications for how well markets serve society. This paper constructs an economic model where the excessive-choice effect results from search costs. The model shows that it is possible for markets to produce too much variety, but there are also incentives inducing markets to provide an optimal variety. Advertising, retailer market power, and slotting fees are not just signs of imperfect competition, but mechanisms of ensuring consumers are presented with an ideal choice set.

Suggested Citation

  • Norwood Franklin B, 2006. "Less Choice is Better, Sometimes," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 4(1), pages 1-23, February.
  • Handle: RePEc:bpj:bjafio:v:4:y:2006:i:1:n:3
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    References listed on IDEAS

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    1. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, March.
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    Cited by:

    1. Knockaert, Jasper & Verhoef, Erik T. & Rouwendal, Jan, 2016. "Bottleneck congestion: Differentiating the coarse charge," Transportation Research Part B: Methodological, Elsevier, vol. 83(C), pages 59-73.
    2. Chavez, Daniel & Palma, Marco, 2015. "Off the reservation: Pushing the bounds of rationality in experimental auctions," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 202164, Agricultural and Applied Economics Association;Western Agricultural Economics Association.
    3. 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.

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