Less Is Better Effect

The Basic Idea

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

Thus a thing is sometimes added to by being diminished and diminished by being added to.

– Lao Tzu, 6th century sage and author of ancient Chinese religious text Tao Te Ching

Key Terms

Framing: refers to the fact that the way information is presented to us often skews our perception of different choices. In terms of the less-is-better effect, whether a choice is framed in isolation or in comparison with other options impacts how much we value it.

Distribution information: information that people use in order to evaluate one option in comparison to others. People may ‘distribute’ information from Option A in order to make an informed choice about Option B. 2

Norm Theory: stipulates that when people evaluate an option that is presented in isolation, they tend to evaluate their option relative to other objects in the same category. This is why Richard’s gift, an expensive pen in the category of pens, was judged to be of higher value than Rachel’s gift, which was of lesser value within its own product category.2

Preference reversal: refers to a scenario in which people change their mind on which of two options they prefer.3 For the less-is-better effect, preference reversal occurs when options are presented together after they have been presented in isolation.

History

Credit for discovering the less-is-better effect is often given to Christopher Hsee, a behavioral scientist at the University of Chicago. However, a 1994 study conducted by Max Bazerman, another behavioral scientist, demonstrated the phenomenon without using specific vocabulary. Following previous studies that demonstrated that individuals are often more concerned with their relative outcome compared to other people performing the same task or going after the same job, Bazerman wanted to see how social information would affect business students’ decisions.4

Max Bazerman asked business students to evaluate hypothetical job offers. One group of students was assigned the single choice condition, in which they read 12 hypothetical job descriptions one at a time and determined whether they would accept or reject the job offer. The other group of students were given the multiple choice condition and saw two job descriptions at a time; they were asked whether they wanted to accept one of them, or reject both and continue looking at job offers.4

In all job descriptions, subjects were told both what their own salary would be and the salary of other incoming entry-level positions. The salaries varied from job to job. Bazerman found that students in the single choice condition were more likely than students in the multiple choice condition to accept a lower salary if other entry-level roles would be paid the same.4 This suggested, in line with norm theory, that students who were presented choices in isolation used information about choices within the same category to make their decision, whereas students in the multiple choice theory had greater distribution information and were able to evaluate the job offers against one another.

A year later, Christopher Hsee conducted his now-famous ice cream study, which formalized the concept of the less-is-better effect, as it also demonstrated the specific preference reversal now associated with the effect. In his study, Hsee asked participants to imagine that they were on a beach with an ice-cream vendor nearby. One group of the participants was told that the vendor was selling 8 oz scoops of ice cream in 10 oz cups, while the other group was told that the vendor was selling 7 oz of ice cream in 5 oz cups. Participants were asked how much they would be willing to pay for the ice cream.5

Hsee found that participants were actually willing to pay more for the small volume of ice cream in the too-small cup. However, when participants were asked to imagine that there were two vendors on the beach, one selling each option, participants were more likely to go for the bigger volume in the too-big cup.5

Hsee concluded that when presented with an isolated option, people tend to make choices based on what seems appealing in context. Believing that the vendor was giving more ice cream than he was supposed to, since it was 7 oz in a 5 oz cup, made people feel like they were getting a good deal. However, when people are presented with two options together, they have more information to use in order to evaluate each choice and will therefore no longer prefer the ‘lesser’ option.5

Consequences

The less-is-better effect demonstrates that we sometimes make suboptimal decisions if items are presented to us individually. Even though we would like to think of ourselves as rational decision-makers, time after time, insights from behavioral economics prove us wrong. If we were rational decision makers, the context under which a choice was presented wouldn’t affect our choice outcome.

Although having 1 oz less of ice cream doesn’t seem like the worst thing in the world, it provides evidence that we are not making decisions that maximize utility because we evaluate our options based on only a small portion of information. It can have more serious consequences in cases such as Bazerman’s job offer study, in which participants were more likely to accept a lower-paying job just because it was presented to them alone, instead of alongside another job offer. Unfortunately, this scenario reflects how we make choices in real-life – you would often have to accept one job offer before knowing all possible job offers that you could receive. Since we are often presented with information in isolation, the less-is-better effect shows us that we need to become better evaluators.One way to do so might be to try and supplement the missing information about other similar jobs. For example, you could look at websites like Glassdoor that tell you how much someone in a given position is currently making, which would give you more information to compare your singular job offer to.

Additionally, it isn’t just the people accepting the offer that are impacted by the less-is-better effect. In a subsequent study in 1996, Hsee examined whether the heuristic affected the decisions of people offering jobs.6 In the study, participants were presented with two hypothetical candidates for a computer programmer position. Both candidates had gone to the same university with a 5.0 GPA scale, but Candidate A had a 4.9 GPA and had written 10 computer programs in the last two years, whereas Candidate B had a 3.0 GPA and had written 70 computer programs in the last two years. Participants either saw both of the candidates and had to evaluate which was better and what salary they would offer to each, or only saw either Candidate A or B. Hsee found that people who judged both candidates were more likely to hire Candidate B, since they had more computer programming experience, however, those that judged the candidates separately offered a much higher salary to Candidate A. This study demonstrates that the less-is-better effect can have serious implications when it comes to bias in hiring decisions.6

The less-is-better effect also affects our willingness to pay for items, which businesses take advantage of through marketing techniques. By only offering one option, rather than many different combinations of deals, companies are able to charge customers more than an item is actually worth, such as in the case of the ice cream vendor who would have been able to sell less ice cream in a smaller cup. Businesses also frame offers as ‘bonuses’, which make customers wrongly believe the price is worth the item, since they consider the bonus a treat. .7 For example, you might be willing to pay more for a hamburger that comes with ‘free’ fries at one restaurant even if it is actually more expensive than buying a hamburger and fries at a different restaurant. If those two options were presented next to each other this wouldn’t be the case; you are disadvantaged by the fact that you are only at one restaurant at one time, and that each option is therefore presented in isolation.

Controversies

The less-is-better effect suggests that when we are presented with less information, we are worse decision makers. However, other behavioral science concepts such as satisficing suggest that making decisions based on less information can be more efficient, as it saves us time, money and energy. It is almost impossible for us to collect all the information about every possible alternative when we are faced with a decision and we therefore have to work with what is available. In the less-is-better case, the information that is available to use to make a decision is often information about other comparable choices.

Although in a perfect world, all our decisions would be guided by rationality and logic, humans don’t actually operate this way. We instead are guided by bounded rationality, which still allows us to pick ‘good enough’ choices. If we are satisfied by those choices, is getting more and more information that could change our decisions really beneficial? Or, is there value in knowingly making informed choices within our restraints, and then accepting the choices we’ve made even upon new information?

Case Studies

Marketing strategies

The less-is-better effect shows that when we are presented with more information, we are better at making rational decisions because we use the pieces of information against one another to evaluate the worth of each option. For consumers, this means shopping by comparing items against one another; for businesses, this means that giving consumers more choices might actually reduce the likelihood that they purchase anything.

Psychologists Sheena Iyengar and Mark Lepper conducted a study in 2000 to examine how the volume of choice impacted grocery shoppers’ decisions. The first variable was to present shoppers with a display table that contained 24 different varieties of gourmet jam. If someone sampled the jams, they received a $1 coupon they could use to purchase any jam. On a different day, shoppers saw a display table with only six different varieties of gourmet jam and again, shoppers received a coupon if they had a sample. Although the large display attracted more shoppers than the smaller one, Iyengar and Lepper found that more purchases were made by shoppers that had seen the six-jam display.8

The result of this study is likely due to the less-is-better effect. With only six jams, there were less points of comparison from which to evaluate each individual jam. When there were 24 jams, shoppers had the chance to evaluate each jam against 24 others, which could cause them to think more rationally, and realize the jam itself was not worth its price tag. Moreover, more options often leads to less decision making, as evidenced by the choice overload bias. Businesses therefore should take advantage of the less-is-better heuristic and refrain from overwhelming their consumers with too many choices.

Consumer insights

While businesses might want to shy away from presenting consumers with too many options once their product is on the market, the less-is-better effect also informs how companies should present items to focus groups in order to get the most accurate evaluations of their products.9 Imagine, for example, that a winery wants to know how the public will receive their latest blend. If they present a focus group with just one sample (in isolation), evaluators will likely give subjective opinions, or overvalue the wine, since they have no point of comparison. Alternatively, if the winery provides two different blends as samples, individuals can compare them to one another and give a more accurate evaluation of both wines. By receiving more accurate and objective opinions, the winery can better understand how their new blend will be received and make adjustments as necessary.

Related TDL Resources

Can’t Say No To Promotional Offers?

The less-is-better effect shows that as consumers, we get excited when we are offered discounts or bonuses because we feel that the item we are receiving is increasing in value relative to other items within that same category. In this article, our writer Preeti Kotamarthi examines the other biases and heuristics that impact the way that we perceive discounts. This information is useful for consumers to avoid being duped by promotional offers, and for businesses to understand the best marketing strategies.

Overwhelmed by Choice: Consumers and Green Energy

While the less-is-better effect is often discussed as a marketing ploy businesses use to manipulate consumers into overvaluing their products, there might also be practical and ethical applications of the heuristic. In this article, our writer Anastasia Gavrilova implores ‘green’ companies to understand that consumers are often overwhelmed by choice, which leads to inaction. By using the less-is-better effect, and presenting consumers with a simple green choice, companies might be more successful in motivating consumers to help relieve the impacts of climate change.

Sources

  1. Natator88. (2016). Less is Better Effect – Cognitive Bias 1 of 188. Steemit. https://steemit.com/cognitive-biases/@natator88/less-is-better-effect-cognitive-bias-1-of-188
  2. Hsee, C. K. (1998). Less is better: When low-value options are valued more highly than high-value options. Journal of Behavioral Decision Making, 11(2), 107-121. https://doi.org/10.1002/(sici)1099-0771(199806)Behavioral Economics. (2019, March 29). Preference reversal. https://www.behavioraleconomics.com/resources/mini-encyclopedia-of-be/preference-reversal/
  3. 11:2<107::aid-bdm292>3.0.co;2-y
  4. Bazerman, M. H., Schroth, H. A., Shah, P. P., Diekmann, K. A., & Tenbrunsel, A. E. (1994). The inconsistent role of comparison others and procedural justice in reactions to hypothetical job descriptions: Implications for job acceptance decisions. Organizational Behavior and Human Decision Processes, 60(3), 326-352. https://doi.org/10.1006/obhd.1994.1088
  5. The Decision Lab. (2020, October 5). Less-is-better effect. https://thedecisionlab.com/biases/less-is-better-effect/
  6. Hsee, C. K. (1996). The evaluability hypothesis: An explanation for preference reversals between joint and separate evaluations of alternatives. Organizational Behavior and Human Decision Processes, 67(3), 247-257. https://doi.org/10.1006/obhd.1996.0077
  7. Ingliss-Arkell, E. (2013, September 20). The less-is-better effect lets you fake generosity. Gizmodo. https://io9.gizmodo.com/the-less-is-better-effect-lets-you-fake-generosity-1344651095
  8. Schwartz, B. (2006, June 1). More Isn’t Always Better. Harvard Business Review. https://hbr.org/2006/06/more-isnt-always-better
  9. Valorian. (2019, August 7). Less-Is-Better Effect: How To Give Better Gifts [Video]. YouTube. https://www.youtube.com/watch?v=HajXt1G8Y7g

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