You’ve probably heard the famous saying, “less is more,” a minimalistic motto which suggests the advantages of a more simplistic lifestyle. While the less-is-better effect is predicated on a similar idea, it suggests that our view that less is better is actually a cognitive bias describing that the context under which we are presented with a choice affects how much we value our choices. In other words, when we view our options separately, we occasionally prefer the worse option, which changes once we view them together.
The less-is-better effect often pops up when we perceive gifts. Imagine that on your birthday, for example, two of your friends give you a birthday gift. Your first friend, Richard, gives you an expensive $60 fountain pen. You know that it’s easy to find a $10 fountain pen and think to yourself that Richard has been very generous. Afterwards, your friend Rachel gives you an $80 jacket. You know that jackets sometimes easily surpass a $250 price tag and can’t help but feel like Rachel has not been very generous with her gift. The fact that you overvalue Richard’s gift and undervalue Rachel’s gift is a result of the less-is-better effect.
However, if you’d been presented with both Richard and Rachel’s gifts at the same time, the less-is-better effect would diminish. In fact, you would likely reverse your opinion and believe that Rachel’s gift was the better one. That’s because it is more difficult to evaluate an option that is presented in isolation. With Richard’s gift, you had to rely on your knowledge of the prices of fountain pens that made the gift seem generous, instead of evaluating it in relation to your other gifts, like the jacket. When we are presented with options in isolation, we lack a good baseline for comparison, and therefore think more highly of less attractive items. 1