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Gems of the Month

The Paradox of Choice by Barry Schwartz

Watch this gem in action the next time you go to the movies. How ‘tempting’ are the Jumbo Popcorn and Jumbo soft drinks when compared with the smaller sizes? Watch the ‘great value’ you can get with only an extra 50 cents! 

Also note how rational doctors (and judges, although not mentioned in the excerpt) are not immune from irrational diagnosis or decisions…

 

“The Psychology of Trade-Offs

The psychology of trade-offs has been investigated in a series of studies … Confronting any trade-off, it seems, is incredibly unsettling…

What then do people do if virtually all decisions involve trade-offs and people resist making them? One option is to postpone or avoid the decision. Imagine being in the market for a new music system and seeing a sign in a store window announcing a one-day clearance sale on CD players. You can get a popular Sony CD player for only $99, well below list price. Do you buy it, or do you continue to research other brands and models? Now imagine that the sign in the window offers both the $99 Sony and a $169 top-of-the-line Aiwa, also well below list price. Do you buy either of them, or do you postpone the decision and do more research?

When researchers asked, they found an interesting result… Faced with one attractive option, two-thirds of people are willing to go for it. But faced with two attractive options, only slightly more than half are willing to buy. Adding the second option creates a conflict, forcing a trade-off between price and quality… By creating the conflict, this second option makes it harder, not easier to make a choice.

Consumers need or want reasons to justify choices, as we see in a third hypothetical situation. A similar one day offer sale offers the $99 Sony and an inferior Aiwa at the list price of $105. Here the added option does not create conflict. The Sony is better than the AIWA andit’s on sale. Not surprisingly almost no one chooses the AIWA.

Surprisingly however, 73 percent go with the Sony, as opposed to 66 percent when it was offered by itself. So the presence of a clearly inferior alternative makes it easier for consumers to take the plunge.

Perhaps seeing the inferior AIWA bolsters people’s confidence that the Sony is really a good deal, though in a market with dozens of brands and models of CD players available, the presence of this second alternative doesn’t really prove much…”

“There is another, more urgent example of how conflict induces people to avoid decisions. In this study, doctors were presented with a case history of a man suffering from osteoarthritis and asked whether they would prescribe a new medication or refer the patient to a specialist. Almost 75 percent recommended the medication. Other doctors were presented with a choice between two new medications or referral to a specialist. Now only 50 percent went with either of the medications, meaning that the percentage of those referring doubled. Referral to a specialist is, of course, a way to avoid a decision…

…People find decision making that involves trade-offs so unpleasant that they will clutch at almost anything to help them decide.”

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