September 4, 2012

When people negotiate, they must make many decisions about how to proceed and whether to accept particular terms. It is often assumed that the more options persons possess the easier it is for them to determine the optimal one. In The Paradox of Choice (2004), Barry Schwartz thoughtfully demonstrated that this assumption is incorrect.

People who must choose among a few options often make better decisions than people who must choose among many options, because with a few choices they can compare all of their options together. When individuals compare more expansive alternatives, however, they often can’t explore them together. They compare Option 1 with Options 2, 3, and 4, then Option 5 with Options 6, 7, and 8, and Option 9 with Options 10, 11, and 12. Even though Option 2 may best suit their overall needs, they may select Option 10 because when they evaluate it they only compare it to Options 9, 11, and 12. Since Option 10 is clearly preferable to Options 9, 11, and 12, they accept Option 10. Had they compared it more closely with Options 1 through 8, they would have appreciated the fact that Option 2 was the best of the twelve.

To minimize the likelihood decision-makers will be adversely affected by this phenomenon, they should initially try to eliminate the inferior options from their final assessment group. They should also list the objective pros and cons of each alternative that will be finally considered. If they can reduce their ultimate options to a finite number and develop relatively objective assessments of each, they should find it easier to select the one that is actually best for them.