Cannot decide which cell phone or car to buy just because there are too many choices? Following a four-step formula can help you make the best decision, says a study.
Divide the options into piles of four; choose the best option from each pile; put the winners from the first round into a new finalist pile and then choose the best option from winners of the earlier four selections, the researchers said.
"We know from all the studies that we’ve done that if you have a smaller choice set, you tend to do better," said Tibor Besedes, associate professor at Georgia Institute of Technology.
"There is a lot of information that you have to go through, and you have to understand what all of those things mean, and from that information, figure out what is best for you. You cannot do that while choosing from 16 options at a time," he said.
For the study, participants were asked to choose one option that would provide the best payoff from 16 choices.
The researchers found that instead of considering all options together, a strategy called sequential tournament approach yielded better results.
In this approach, four groups of four options were randomly chosen by a computer, and the participants were asked to choose one option from each group.
The options chosen from the first four groups were then put into a finalist group from which the final selection was made.
The study appeared online in the journal The Review of Economics and Statistics.