Free to choose?

Written by Carl Davidson, Research First Ltd

If you’re like most people, you probably think you’re good at making decisions and pretty much always know what you want (and why). The evidence from psychology, on the other hand, points the other way.

For instance, Barry Scwartz’s The Paradox of Choice shows that the more choices we are faced with when making a decision, the slower we are to make that decision and the more unhappy we are with our choice (if you haven't read the book you can watch the TED talk here).

Because Schwartz's work flies in the face of common sense and classical economics (where more choice is always a good thing), his research has attracted its fair share of critics. In addition, attempts to replicate the jam experiment at the heart of Schwartz's argument have not been an unqualified success. However, the notion that more choices slow down decision making has been demonstrated many times. It forms the basis of Hick's Law, which states there is a logarithmic relationship between the number of options presented to someone and their reaction time.

Hick's Law is often used when designing control systems ('user interfaces') and, more recently, websites. Just like the heart of Schwartz's argument, Hick's Law tells us that the key when presenting options is not to remove choice but to reduce it.

But don’t think having fewer choices automatically means greater agency in our decision-making: One of the most useful insights from behavioural economics is that people don't respond to choices so much as how those choices are framed. Clever marketers know this and so frame choices in a way that silently influence your decision making.

The most famous of these is the so-called Decoy Price. This is the use of high-priced alternatives to reset your expectation of what 'reasonable' prices are. Restaurants don't really expect to sell those $400 bottles of wine but they use them to influence you to buy the $40 bottles (as an aside, always avoid the second cheapest bottle on a wine list because this is the one the owner knows you are most likely to buy and is often lower quality than you think the price signals).

Menus are a masterclass in the use of options to shape the choices you make. There are even menu engineers to help restaurants (and we are not making this up) "build value and increase profits through menus." The lesson here is that the menu is trying to manipulate you and every little detail helps.

And the greater insight here is that ‘freedom to choose’ doesn’t always mean you’re choosing freely.