Abstract
This paper theoretically analyzes the so-called paradox of choice, introduced by Schwartz (The paradox of choice: why more is less, Harper Perennial, New York, 2004), which posits that having too many choices can make us unhappy. Although one’s possibilities broaden as the number of choices increases, the paradox of choice occurs because among a greater number of possibilities, making the best choice entails a greater number of complications and incurs higher choice costs. The purpose of this paper is to focus on a specific example of this paradox with respect to consumer nonpurchase behavior, in order to derive the optimal strategy for a firm selling goods or services for consumer purchase. In particular, in constructing a decision-making model by which to ascertain the optimal product quantity (variety) for a firm within the context of the paradox of choice, we can derive the number of product offerings needed to maximize sales. We point out that it is important for a firm to consider nonpurchase behavior. The optimal quantity is inversely proportionate to the consumer’s complications and choice costs in making a choice.
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This phenomenon has been referred to, variously, as the too-much-choice effect (Iyengar and Lepper 2000), choice overload (Chernev 2003), and hyperchoice (Mick et al. 2004); a large amount of similar research has been conducted. The current study considers in particular pertinent marketing applications and refers to related research.
Taking a different theoretical approach, there is research that focuses on search costs, studies consideration sets, and undertakes cost-benefit analyses (Hauser and Wernerfelt 1990; Roberts and Lattin 1991). Such an approach allows assessment of any difference in consumers’ expected utility before and after new products are added, as well as the costs incurred in searching for products; it also allows one to construct a logit model that assesses whether consumers include a given product in the consideration set. The current study differs from these, in that it researches the influence at a given point in time of all given consideration sets, and it considers the consideration sets as being determined exogenously by firms.
In our setting, nonpurchase behavior has two meanings: One is the case where a consumer is not interested in products at all, and the other is the case where the cost incurred from a choice among products becomes larger than a level of gross utility from consuming a product. We assume that the first type of consumer, who has no interest about a product, is excluded.
The jam experiment comprises two stages of choice: the choice of sales area with regard to variety and the choice of whether or not to actually purchase. However, the current study assumes its model to have a single stage of choice, namely whether or not to make a purchase after having observed the products. In the jam experiment, overwhelmingly, more consumers chose nonpurchase at the sales area displaying a greater number of products. To focus on this point, with the aim of simplification, a one-stage situation is posited.
The purpose of this study was to derive an optimal corporate sales strategy while considering consumers’ nonpurchase behavior. Since a consumer gains a level of total utility when consuming a product, we also interpret a level of cost as post-purchase regret at that time.
To simplify the calculation and analysis, we assume that n is a positive continuous variable, though n is considered as a natural number.
We also derived the optimal quantity in the same way for the case of \( c\left( n \right) = a\sqrt n \), where the choice cost function is a concave function. The result is \( n^{*} = \frac{1}{{ea^{2} }} \).
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Acknowledgments
Ebina acknowledges the financial support by JSPS Grant-in-aid for Young Scientist (B) 24730224 and Grant-in-aid for Scientific Research (C) 24530264. Kinjo acknowledges the financial support by JSPS Grant-in-aid for Young Scientist (B) 25780272 and Grant-in-aid for Scientific Research (C) 24500183.
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Appendix
Appendix
As stated in the first section, nonpurchase mainly takes place due to the paradox of choice, as follows. When choosing from a large number of products that will maximize one’s utility, it becomes difficult to evaluate while appropriately ordering one’s own preferences with regard to the products in the attribute space; for this reason, fatigue and other choice costs increase. If we refer to our settings, when there are n products, it is thought that a situation in which the demerits derived from certain factors—such as the costs of choosing from n products—are greater than the maximal utility to be gained therein. In short, the following conditions exist:
This situation is synonymous to one in which the eventually obtained utility is less than 0, as seen below.
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Kinjo, K., Ebina, T. Paradox of choice and consumer nonpurchase behavior. AI & Soc 30, 291–297 (2015). https://doi.org/10.1007/s00146-014-0546-7
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DOI: https://doi.org/10.1007/s00146-014-0546-7