How to make good decisions in a world of unlimited choice
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Earlier this week I looked at some new research into crowdfunding. It was looking specifically at whether giving potential backers more ways to get involved would help the project or not.
Interestingly, it emerged that this was in fact the case. I say interestingly, because there is a significant amount of literature suggesting that too many choices can lead to much worse decisions.
A case in point is a recent paper from researchers at Georgia Tech. It explores the way an excessive number of options can lead to choice overload.
“Standard economic theory will tell you that more choice is always better,” the authors say.
“Theoretically, that works out, but when you have to apply it, that’s very different. When you give people a lot of options, they can get bogged down and, at some level, become unwilling to consider anything because it just gets too complicated.”
How to make better choices
To help people faced with an overwhelming array of choices, the researchers suggest a number of possible strategies.
Participants were invited to try one of three strategies to help them choose the best option from one of 16 choices. If they made the best choice, they’d be given $25.
The three strategies were:
- Simultaneous choice, in which all 16 choices were considered together.
- Sequential elimination, which began with choosing one option from among four choices. Three additional choices were then added to the one chosen from the first group, and the process continued through five rounds until all but one option was eliminated.
- Sequential tournament, in which four groups of four options were randomly chosen by a computer, and the subjects were asked to choose one option from each group. The options chosen from the first four groups were then put into a finalist group from which the final selection was made.
Participants could use any of the strategies, or indeed all three, and were asked to evaluate their choice at the end of the process.
Interestingly, the tournament like approach seemed to produce the best results. Whilst this was widely disliked by the participants, it did lead to an increase in good choices by around 50 percent. This approach also took a bit more time than the other strategies.
By contrast, the most popular method was to consider each option together, but this ended up producing the worst outcomes.
“We know from all the studies that we’ve done that if you have a smaller choice set, you tend to do better,” the authors say. “There is a lot of information that you have to go through, and you have to understand what all of those things mean, and from that information, figure out what’s best for you. You can’t do that while choosing from 16 options at a time.”
When participants eliminated one choice per round, they didn’t perform any better, partly the researchers believe, because we tend to stick to the choices we’ve already made.
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