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When More Alternatives Lead to Less Choice

Washington University in St. Louis, St. Louis, Missouri 63130
Haas School of Business, University of California, Berkeley, Berkeley, California 94720
kuksov{at}olin.wustl.edu
villas{at}haas.berkeley.edu

This paper shows that when the alternatives offered to consumers span the preference space (as it would be chosen by a firm), search or evaluation costs may lead consumers not to search and not to choose if too many or too few alternatives are offered. If too many alternatives are offered, then the consumer may have to engage in many searches or evaluations to find a satisfactory fit. This may be too costly and result in the consumer avoiding making a choice altogether. If too few alternatives are offered, then the consumer may not search or choose, fearing that an acceptable choice is unlikely. These two forces result in the existence of a finite optimal number of alternatives that maximizes the probability of choice.

Key Words: product line; choice; search; information overload
History: Received: October 1, 2007; accepted: August 27, 2009.