Choice Overload in Online Platforms

44 Pages Posted: 2 Oct 2017 Last revised: 7 May 2019

See all articles by Diego Aparicio

Diego Aparicio

Massachusetts Institute of Technology (MIT), Department of Economics

Drazen Prelec

Massachusetts Institute of Technology (MIT) - Sloan School of Management; MIT Department of Economics; MIT Brain and Cognitive Sciences

Date Written: April 10, 2019

Abstract

The choice overload effect refers to the experimental finding that a larger choice set may in fact yield fewer overall purchases than would be observed with a smaller set. This paper studies choice overload in a large scale online experiment, involving thousands of households making major purchases. The field experiment was conducted by a leading online travel and price aggregator company, which offered some users a limited set of hotels while others had access to the full list. Overall, results are in the direction opposite to choice overload, i.e. purchase rates and click-through rates decreased with fewer choices. However, there are heterogeneous effects across users: while local users exhibit lower purchase rates, foreign users exhibit higher purchase rates when offered fewer choices. Therefore, familiarity with the choice set is found to be an overchoice moderator. This evidence suggests that, while there are gains from variety, online retailers can profit from choice set customization.

Keywords: Choice Overload, E-Commerce, Online Controlled Experiments, Retail, Search

JEL Classification: C9, D12, M31

Suggested Citation

Aparicio, Diego and Prelec, Drazen, Choice Overload in Online Platforms (April 10, 2019). Available at SSRN: https://ssrn.com/abstract=3044096 or http://dx.doi.org/10.2139/ssrn.3044096

Diego Aparicio (Contact Author)

Massachusetts Institute of Technology (MIT), Department of Economics ( email )

Cambridge, MA
United States

Drazen Prelec

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

E40-161
MIT
Cambridge, MA 02142
United States
617-253-2833 (Phone)

MIT Department of Economics ( email )

Department of Economics
E52-371
Cambridge, MA 02142
United States

MIT Brain and Cognitive Sciences ( email )

43 Vassar Street
Cambridge, MA 02139
United States

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