Firms believe that if they provide consumers with more options, they will be more inclined to buy the items due to the likeliness of finding what they want. As a result, most businesses provide a diverse range of items. Jeans of all sorts, automobiles, cuisine, you name it. That way, it is believed, the consumer will be able to locate exactly what s/he are looking for. But this is not the case. Every day, humans make hundreds of decisions, the majority of which are only "good enough" rather than perfect. All the choices we make revolve around the concept of behavioural economics. 

 

A study on jams was released in 2000 by Columbia and Stanford University psychologists Sheena Iyengar and Mark Lepper. People might locate a display stand with 24 different kinds of jams on a normal day at a local food store. Then, on another day, at the same food market, consumers were only offered six options for jam. The result was quite shocking. While the large display table (with 24 jams) drew more attention, Iyengar and Lepper discovered that individuals were significantly less likely to buy a jar of jam from the larger table than the smaller display table. (Geerts, 2018)

While having many options may appear tempting at first, the study demonstrates that having too many options leads to incorrect outcomes. In his book “Development as Freedom”, famous economist Amartya Sen emphasises the significance of choice. Instead of being obsessive about freedom of choice, he says that we should consider if it nurtures or depletes us. Furthermore, the increasing choice may or may not lead to the type of freedom that matters.

 

Understanding how consumer behaviour is influenced by behavioural economics may help marketers create a better customer experience and keep their businesses at pace. Consumers decide to follow others and imitate group behaviours rather than making autonomous and atomistic decisions based on their personal information, known as herding. In a world of uncertainty, Keynes focused on the motives to mimic and follow the crowd, giving rise to herding theory. However, because herding is difficult to explain as a result of rational expectations theory, economists have opted to maintain rationality assumptions, although in a weaker version. Keeping in mind the rational expectations theory and herding as a concept of behavioural economics, labelling products as ‘best sellers’ can help consumers make decisions. (Resolving the Paradox of Choice with Behavioural Economics, 2018)

 

Another important option is staff suggestions, which may be obtained at wine shops and bookstores. Algorithmic suggestions are also widespread, such as those seen on streaming video services or e-commerce platforms that suggest products based on a user's purchasing history. However, other consumer product studies imply that, ironically, more choice should be supplied in product domains where individuals are likely to feel ignorant (such as wine), while less choice should be provided in domains where people are likely to feel informed (such as soft drinks). I'm not advocating for the abolition of all choices. Let's face it: a person would never be satisfied with only vanilla and chocolate flavoured ice cream in an ice-cream parlour, or a binge-watcher would never be satisfied with only a few options on Netflix or any other OTT platforms. Rather than eliminating all options, we must identify a healthy middle ground.