It’s All a Matter of Choice: Financial Capability

Posted by Step-Up Finance (Business) on Jan 26, 2010 in Blog, Business, Economy, Finance, Financial Markets, Miscellaneous, Uncategorized | 0 comments

Lots of choice would seem to be a good thing but if, according to Sheena Iyengar  and Mark Lepper’s   experiment, involving jam tasting in California, it would seem that it makes people less happy and showed that lots of choice makes people less likely to choose anything.

Iyenger and Lepper offered either 6, or 24, varieties of jam at a tasting in a supermarket. The tasters were offered a discount voucher to buy the jam. The big display attracted more customers but fewer buyers. The lesser display made more sales; statistically 4,000%  better as only 3% of the 24 choice used their vouchers whilst 30% of the 6 choice used theirs.

So, what of choice?  This experiment involved the same product with more choice amongst that product  – which is different from offering entirely different products.

They experimented again with displays of chocolates. Participants were offered to choose one chocolate to eat from either six or thirty options. Those choosing from the lesser amount were more satisfied and more likely to purchase chocolates again. Illustrating that dissatisfaction is likely more prevalent when choice is larger.

 The Executive Summary of Financial Capability: A Behavioural Economics Perspective  states many interesting things and includes lots of such experiments.

To which market is limiting choice directed at, and how limited does choice become before there is no choice? 

(Image  and Article credit: Copyright SUF)