IDEAS home Printed from https://ideas.repec.org/p/fem/femwpa/2006.37.html
   My bibliography  Save this paper

Choosing to Have Less Choice

Author

Listed:
  • Maria Salgano

    (Northwestern University)

Abstract

This 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.

Suggested Citation

  • Maria Salgano, 2006. "Choosing to Have Less Choice," Working Papers 2006.37, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2006.37
    as

    Download full text from publisher

    File URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2006-037.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bertrand, Marianne & Karlan, Dean S. & Mullainathan, Sendhil & Shafir, Eldar & Zinman, Jonathan, 2005. "What's Psychology Worth? A Field Experiment in the Consumer Credit Market," Center Discussion Papers 28441, Yale University, Economic Growth Center.
    2. Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-824, December.
    3. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    4. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
    5. Marianne Bertrand & Dean Karlan & Sendhil Mullainathan & Eldar Shafir & Jonathan Zinman, 2010. "What's Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(1), pages 263-306.
    6. McFadden, Daniel, 1999. "Rationality for Economists?," Journal of Risk and Uncertainty, Springer, vol. 19(1-3), pages 73-105, December.
    7. Jacoby, Jacob, 1984. "Perspectives on Information Overload," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 10(4), pages 432-435, March.
    8. Faruk Gul & Wolfgang Pesendorfer, 2001. "Temptation and Self-Control," Econometrica, Econometric Society, vol. 69(6), pages 1403-1435, November.
    9. Barry L. Bayus & William P. Putsis, Jr., 1999. "Product Proliferation: An Empirical Analysis of Product Line Determinants and Market Outcomes," Marketing Science, INFORMS, vol. 18(2), pages 137-153.
    10. Manski, Charles F., 2000. "Identification problems and decisions under ambiguity: Empirical analysis of treatment response and normative analysis of treatment choice," Journal of Econometrics, Elsevier, vol. 95(2), pages 415-442, April.
    11. Michaela Draganska & Dipak C. Jain, 2005. "Product‐Line Length as a Competitive Tool," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 1-28, March.
    12. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 797-817.
    13. Kreps, David M, 1979. "A Representation Theorem for "Preference for Flexibility"," Econometrica, Econometric Society, vol. 47(3), pages 565-577, May.
    14. Malhotra, Naresh K, 1982. "Information Load and Consumer Decision Making," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 8(4), pages 419-430, March.
    15. Ravenscraft, David J, 1983. "Structure-Profit Relationships at the Line of Business and Industry Level," The Review of Economics and Statistics, MIT Press, vol. 65(1), pages 22-31, February.
    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. Salgado, Maria, 2006. "Choosing to Have Less Choice," Economic Theory and Applications Working Papers 12188, Fondazione Eni Enrico Mattei (FEEM).
    2. Stefano DellaVigna, 2009. "Psychology and Economics: Evidence from the Field," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 315-372, June.
    3. Kaiser Karen & Schwabe Rainer, 2012. "Preference for Variety," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 12(1), pages 1-32, January.
    4. B Kelsey Jack, "undated". "Market Inefficiencies and the Adoption of Agricultural Technologies in Developing Countries," CID Working Papers 50, Center for International Development at Harvard University.
    5. G. Rejikumar & Aswathy Asokan-Ajitha & Sofi Dinesh & Ajay Jose, 2022. "The role of cognitive complexity and risk aversion in online herd behavior," Electronic Commerce Research, Springer, vol. 22(2), pages 585-621, June.
    6. Omar Al-Ubaydli & John List, 2016. "Field Experiments in Markets," Artefactual Field Experiments j0002, The Field Experiments Website.
    7. Rodriguez-Lara, Ismael & Ponti, Giovanni, 2017. "Social motives vs social influence: An experiment on interdependent time preferences," Games and Economic Behavior, Elsevier, vol. 105(C), pages 177-194.
    8. Daniele Pennesi, 2020. "Identity and information acquisition," Carlo Alberto Notebooks 610, Collegio Carlo Alberto, revised 2021.
    9. Daniele Pennesi, 2021. "Between Commitment and Flexibility: Revealing Anticipated Regret and Elation," Working papers 071, Department of Economics, Social Studies, Applied Mathematics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    10. Jacobs Martin, 2016. "Accounting for Changing Tastes: Approaches to Explaining Unstable Individual Preferences," Review of Economics, De Gruyter, vol. 67(2), pages 121-183, August.
    11. Zhang, Cong & Pan, Siyu & Zhao, Yanhui, 2024. "More is not always better: Examining the drivers of livestream sales from an information overload perspective," Journal of Retailing and Consumer Services, Elsevier, vol. 77(C).
    12. Tom Wilkening, 2009. "The Informational Properties of Institutions: An Experimental Study of Persistence in Markets with Certification," Department of Economics - Working Papers Series 1087, The University of Melbourne.
    13. Bougheas, Spiros & Nieboer, Jeroen & Sefton, Martin, 2015. "Risk taking and information aggregation in groups," Journal of Economic Psychology, Elsevier, vol. 51(C), pages 34-47.
    14. Cooper, David J. & Rege, Mari, 2011. "Misery loves company: Social regret and social interaction effects in choices under risk and uncertainty," Games and Economic Behavior, Elsevier, vol. 73(1), pages 91-110, September.
    15. Ekström, Mathias, 2021. "The (un)compromise effect: How suggested alternatives can promote active choice," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 90(C).
    16. Mark Heitmann & Andreas Herrmann & Christian Kaiser, 2007. "The effect of product variety on purchase probability," Review of Managerial Science, Springer, vol. 1(2), pages 111-131, August.
    17. Eisenbach, Thomas M. & Schmalz, Martin C., 2016. "Anxiety in the face of risk," Journal of Financial Economics, Elsevier, vol. 121(2), pages 414-426.
    18. Liang Guo, 2016. "Contextual Deliberation and Preference Construction," Management Science, INFORMS, vol. 62(10), pages 2977-2993, October.
    19. Gallo, E. & Langtry, A., 2020. "Social Networks, Confirmation Bias and Shock Elections," Cambridge Working Papers in Economics 2099, Faculty of Economics, University of Cambridge.
    20. Marek Jenöffy, 2023. "A Seesaw Model of Choices," Working Papers hal-04136550, HAL.

    More about this item

    Keywords

    Choice; Opportunity Sets;

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:fem:femwpa:2006.37. 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: Alberto Prina Cerai (email available below). General contact details of provider: https://edirc.repec.org/data/feemmit.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.