Money. For Nothing?: Do people pay to reduce their decision space when faced with too many options? An experimental approach.

Abstract

Standard economic theory posits that having more choice is always better than having less. However, previous research shows that having too many options may lead to choice overload, lowering decision quality and even impairing it altogether. Through a set of economic experiments I examine whether subjects are willing to pay to reduce their decision space if faced with too many options. Three decision curtailing conditions are considered: i) reducing the choice set, ii) delegating the choice, iii) not choosing. Participants (N = 133) were randomly assigned to two treatments: i) large choice set, ii) small choice set. In each study subjects could pick between a series of abstract lotteries and a stochastically dominated choice curtailing option. The relative frequencies of this latter alternative is the core interest of the studies. I find a statistically significant effect of the size of the choice set on the decision to pay to forego decision rights, by randomizing the decision, (N = 44, p = 0,045). Likewise, the size of the choice set significantly affects the decision to pay to opt out of the task (N = 44, p = 0,031). On the contrary, the size of the set exerted no significant effect on the decision to pay to reduce it (N = 45, p = 0,143). This research contributes to the literature on decision-making by relating a market mechanism such as prices to counter choice overload. Moreover, these findings suggest and increased role for pricing strategies and product design, especially considering the increasing accuracy of machine learning prediction algorithms.