Too Much Choice Costs Too Much

Everyone appears to like having lots of choice. But research (summarised in a recent Business Strategy Review) by Simona Botti at London Business School and Christopher Hsee at Chicago is showing that too many choices lead to poor decisions.

Botti and Hsee tested university students to see if they would correctly discount the emotional, cognitive, and temporal costs associated with having more freedom of choice, or whether they would always expect better results when provided with more choice.

If one is buying a product with many sellers offering different prices, and if there is a cost to searching for another better offer, people will tend to search for too long. The cost of searching outweighs any benefit gained from a better price.

This is a great example of going beyond optimal decision quality. 100% quality in any of the dimensions of decision quality is defined as the point where additional effort—generating new alternatives, gathering more information, mining analytical outputs—adds less value than the cost. I often talk with clients about how, at some point, more information (eg, more market research) will not change the decision and hence it’s value is zero. It is nice to have some research showing the same phenomenon when it comes to alternatives.

See also:

• Dazed and confused by choice: How the temporal costs of choice freedom lead to undesirable outcomes, Botti & Hsee’s paper in Organizational Behavior and Human Decision Processes.
• Sheena Iyengar’s recent talk at TED exposing the mythology of choice. Iyengar and Botti have worked together.