When More Choice Makes an Offer Less Appealing

An item on the menu you don’t want can undermine your desire for an item you’re perfectly happy to have

Two movie theaters sit across the street from one another. One is showing a movie you’d like to see. The other is showing a movie you’d like to see even more and a second one you feel ho-hum about. Which theater do you choose?

Logically, it should be the second theater. You can ignore the weaker movie and pick the better one. Yet a paper in Journal of Consumer Research by University of Chicago’s Stephanie Smith and UCLA Anderson’s Stephen A. Spiller suggests fewer people choose the theater with multiple options than predictions for maximizing value would suggest. It’s as if the weaker movie drags down the value of the set of options at the theater.

Smith and Spiller examine this tendency in experiments across the domains of movies, cruises, short-form videos and risky gambles. They suggest people undervalue “multi-option alternatives,” choices that contain a later choice within them. As the researchers put it, “decision-makers often choose against their best interests when confronted with a multi-option alternative.”

These kinds of choices are everywhere. They include gift cards (a topic of earlier, related research co-authored by Spiller) usable at one of two stores or festival food tickets redeemable  at any of several food trucks. Choosing the package does not end the decision; it postpones part of it.

Feelings About the Movie You Won’t Be Seeing?

A forward-looking consumer should value such an option at least as highly as its best component. The weaker option can simply be ignored. That is the value-maximizing benchmark. Yet, the studies suggest people often fall short of it.

In a batch of studies with movies as the domain, the researchers used groups of about 300 to 800 participants recruited from Amazon Mechanical Turk. Participants first rated 50 well-known films for how much they wanted to watch them. Then they were given choices to make. 

In a control set of choices, participants chose between two theaters where each showed just one movie. In a matched version, they chose between that same one-movie theater and a theater showing two movies: one they had rated more highly and another they liked less. If people were simply aiming for the best outcome, the two-movie theater should have done at least as well as the better movie on its own, because the weaker movie could always be ignored.

But it didn’t. In the first study, participants chose the two-movie theater about 4 percentage points less often than they chose the better movie when that same movie was offered on its own in a matched single-movie comparison. The gap was small but replicated across related studies.

Cruise Excursions

The researchers ran follow-up tests with alternative possibilities for the results, such as, participant confusion or simple aversion to a later choice, and found these possibilities could not fully explain the pattern. The effect also held when the multi-option set contained more than two options.

In a different setting, 5,000 people were recruited to choose between Caribbean cruise packages that differed only in their choice of shore excursions. Here the gap was much larger, though the design was also different. Each person made just one choice. When a cruise offered only a likely stronger excursion, about 62% chose the cruise; when that likely stronger excursion was paired with a weaker one, only 47% did. A mediocre mangrove tour, sitting beside a rainforest zip line, dragged the whole cruise set down.

Other studies raised the stakes. Participants chose among short-form videos they might watch and among wagers tied to possible cash payouts, with objectively better and worse options. The pattern held.

Across the studies, one clue stood out. The bigger the gap between the strong and weak option, the harder the multi-option alternative fell. A slightly worse companion barely hurt. A much worse one did real damage. That pattern fits a kind of mental averaging: People seem to judge the set by the company it keeps rather than by its best member.

But what exactly loses value? The researchers ran a study to separate two possibilities. Maybe the weak option tarnishes the strong one. Or maybe the whole set gets marked down as a unit. The evidence favored the second. “Adding a lower-value option decreases the value of the set, rather than decreasing the value of the higher-value option,” they write. The favorite film stays appealing. It is the perceived package that suffers.

The researchers also tracked attention. In one study, each option stayed hidden until a participant hovered over it with a cursor. The longer someone lingered on the weaker sub-option, the less likely they were to choose the set containing it.

To test whether attention was causing the effect rather than merely following it, the researchers turned to wagers and manipulated what people saw. In some rounds, the inferior gamble stayed onscreen twice as long as the superior one; in others, the reverse. When the weaker option got more screen time, undervaluation appeared clearly. When the stronger option got more time, the effect nearly vanished. When attention is drawn to the weakest part of an offer, the results suggest that the whole offer starts to look worse.

For anyone who designs a menu, a product line or a pricing page, the lesson is uncomfortable. Adding options to seem generous can backfire. But the paper’s simulations add an important qualifier. Extra options can still help when tastes differ widely, and the seller does not know much about the buyer. The better a firm can predict what a given customer wants, the less reason it has to pad the offer.

The findings challenge a familiar piece of business folk wisdom. More choice is supposed to feel like a gift. These studies suggest it can also act like a tax. A weak option does not just sit quietly on the sidelines. It can pull the value of the whole menu down with it.