The Choice Overload Effect in Online Retailing Platforms

41 Pages Posted: 9 Aug 2021 Last revised: 3 Jan 2023

See all articles by Xiaoyang Long

Xiaoyang Long

University of Wisconsin - Madison - School of Business

Jiankun Sun

Imperial College London - Imperial College Business School

Hengchen Dai

University of California, Los Angeles (UCLA) - Anderson School of Management

Dennis Zhang

Washington University in St. Louis - John M. Olin Business School

Jianfeng Zhang

Alibaba Group

Yujie Chen

Alibaba Group

Haoyuan Hu

Alibaba Group

Binqiang Zhao

Alibaba Group

Date Written: December 31, 2022

Abstract

Problem Definition: Online retailing platforms are increasingly relying on recommender systems to help guide consumer choice. An important but understudied question is how many products to include in a recommendation set. In this work, we study how the number of recommended products influences consumers’ search and purchase behavior in an online recommender system.
Methodology/Results: Via a field experiment involving 1.6 million consumers on an online retail platform, we causally demonstrate that consumers’ likelihood of purchasing any product from the recommendation set first increases then decreases as the number of recommended products increases. Importantly, as much as 64% of the decrease in purchase probability (i.e., the choice overload effect) can be attributed to a decrease in consumers’ likelihood of starting a search (i.e., clicking on any recommended product). We discuss the possible behavioral mechanisms driving these results and analyze how these effects could be heterogeneous across different product categories, price ranges, and timing.
Managerial Implications: This work presents real-world experimental evidence for the choice overload effect in online retailing platforms, highlights the important role of consumer search behavior in driving this effect, and sheds light on when and how limiting the number of options in a recommender system may be beneficial to online retailers.

Keywords: choice overload, retail operations, field experiment, platform operations, search cost

Suggested Citation

Long, Xiaoyang and Sun, Jiankun and Dai, Hengchen and Zhang, Dennis and Zhang, Jianfeng and Chen, Yujie and Hu, Haoyuan and Zhao, Binqiang, The Choice Overload Effect in Online Retailing Platforms (December 31, 2022). Available at SSRN: https://ssrn.com/abstract=3890056 or http://dx.doi.org/10.2139/ssrn.3890056

Xiaoyang Long

University of Wisconsin - Madison - School of Business ( email )

Madison, WI
United States

Jiankun Sun (Contact Author)

Imperial College London - Imperial College Business School ( email )

Imperial College London
South Kensington Campus
London, SW7 2AZ
United Kingdom

Hengchen Dai

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Dennis Zhang

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Jianfeng Zhang

Alibaba Group ( email )

Yujie Chen

Alibaba Group ( email )

Haoyuan Hu

Alibaba Group ( email )

Binqiang Zhao

Alibaba Group ( email )

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