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By John Toon
Having more choices is generally considered a good thing — until you actually have to choose that one cellphone, one prescription drug plan, or one car model from among a dozen or so options. Economists call that problem choice overload, and the frustration it causes can lead to poor decisions.
“Standard economic theory will tell you that more choice is always better,” said Tibor Besedes, an associate professor in the School of Economics at Georgia Tech. “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.”
To help people make better choices when confronted by a large number of options, researchers studied decision-making strategies that break down the options into smaller groups that can be evaluated more effectively. Spurred by concerns over the large number of Medicare Part D prescription plans available, Besedes and collaborators from the University of Arkansas, Louisiana State University, and the University of Connecticut initiated the study to compare strategies for making choices from large groups of options. They set up an online experiment to study decisions made by 111 study subjects asked to select the option that would provide the best payoff from among 16 choices.
The study evaluated three decision strategies: (1) simultaneous choice in which all 16 choices were considered together; (2) 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; and (3) sports 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 four groups were then put into a finalist group from which the selection was made.
The sports tournament increased, by 50 percent, the likelihood that volunteer study subjects would make the best choice — but was least liked and required more time than the other two approaches.
The research, sponsored by the National Institute of Aging, part of the National Institutes of Health, was published by The Review of Economics and Statistics.