And as the complexity of a decision increases, a person is more likely to look for ways -- often erroneous -- to simplify the choosing process. If there are 100 kinds of cereal, instead of looking at all of the characteristics, people will evaluate a product based on something familiar, such as brand name, or easy, such as price.
Even when we choose well, we are often less satisfied because, with so many choices, consumers are certain that somewhere out there was something better. "They think about attractive things they've passed up and missed opportunities," Schwartz says.
Schwartz recently fell victim to this when purchasing a pair of jeans. He went to the Gap and tried on all the available styles. He walked out with jeans that fit well, but he was still not happy with his purchase, he says. With so many different varieties of pants, he was left thinking, "One of them should have been perfect -- and none were."
Most marketers are aware that consumers succumb to the idea that more options means we're more likely to find the perfect product.
And most companies use this fact of human psychology to their advantage. Because creating a new brand of shampoo or laundry detergent is expensive, companies often save money by marketing products that differ only slightly from their competitors' products or other brands of their own. Then they spend time convincing buyers that the products are, in fact, very different, says Sheena Iyengar, a professor at the Columbia University Graduate School of Business.
"How different are 400 types of bottle water?" Iyengar asks. (The answer to her rhetorical question: hardly at all.)
"More and more choice does not guarantee better options, just more of them," Iyengar says. "If customers wise up to the idea that marketers and retailers are using tricks of differentiation, retailers will stop creating the fluffy options."
The final problem with decision-making is that it can overwhelm people to the point of their making a default choice or no choice at all.
A 2000 study by Iyengar and colleagues in an upscale California grocery found that consumers were 10 times more likely to purchase jam when offered six kinds instead of 24. In other words, faced with too many choices, some threw up their hands and opted to buy no jam.
And in another study in 2007, employees who were offered a large variety of options for a 401(k) were more likely to allocate their savings into less complex money market or bond funds rather than select among the many stock mutual funds, which are more lucrative over the long run.
