Less-is-better effect

In a 1998 research, behavioral scientist Christopher Hsee proposed the less-is-better effect. In the experiment, he found that providing a $45 scarf as a present was seen as more generous than giving a $55 coat as a gift. When two alternatives are offered individually, the less-is-better effect characterizes the consumer's inclination to pick the poorer two.

When comparing the take-the-best heuristic with a linear choice approach in forming judgments about which of two things has a higher value on some criterion, one well-known less-is-more effect was discovered. The take-the-best heuristic considers just the first clue that distinguishes between the items, whereas the linear choice method evaluates all available signals. Despite its thrift, the heuristic produced better accurate results than the linear choice technique.

What is the Less-is-better Effect?

When two alternatives are offered individually, the Less-Is-Better Effect outlines how individuals occasionally favor the poorer of two possibilities. People's choices shift as they consider both possibilities, and the less-is-better effect fades away. Understanding the less-is-better effect

In a 1998 research, behavioral scientist Christopher Hsee proposed the less-is-better effect. Hsee found the following in his research:

  • A person who gave a $45 scarf as a present was more charitable than someone who gave a $55 coat as a gift.
  • A 7-ounce scoop of overfilled ice cream was willing to cost more than an 8-ounce scoop of underfilled ice cream.
  • Tableware set with 24 intact pieces was rated higher than one with 31 unbroken pieces plus a few damaged ones.
  • The study found that the less-is-better effect only happened when each choice from the preceding instances was offered independently. The impact was lost when participants saw the two alternatives combined.
  • The evaluability hypothesis, according to Hsee, explains the less-is-better effect. To put it another way, someone who examines items independently focuses their judgment on easy-to-evaluate traits rather than crucial ones.

Implications for consumers and businesses

The most obvious impact for customers is that they are more likely to overpay for things of substandard quality. On the other hand, they may undervalue objects that are objectively more valuable merely because of the context in which they are given. The larger ice cream scoop was objectively a superior option if the goal was to eat more ice cream. However, when the larger scoop was placed in a cup that it did not fill, consumers perceived the smaller scoop (filling a smaller cup) to be greater value for money.

Marketing teams might take advantage of a lack of context to advertise product categories with only one product. A consumer will usually compare a product's pricing or features to similar items in the same price range. The company may charge a greater price and enhance profit margins without this frame of reference.

Why it happens

Christopher Hsee, a behavioral scientist at the University of Chicago, invented the less-is-better effect. Hsee had participants assume that they were spending a summer day at the beach with an ice-cream seller nearby in his research on this bias. One group was informed the vendor-provided 8 oz scoops of ice cream in 10 oz cups, while the second group was told the scoops were 7 oz in a 5-ounce cup. After providing this information, people were asked to write down how much they would be prepared to pay for a meal.

Contrary to popular belief, people were ready to pay more for the smaller, overfilled cup of ice cream than for the bigger, underfilled one. As mentioned earlier, this effect vanished when respondents were told to think there were two vendors on the beach offering both of the alternatives.

Why it is important

The less-is-better effect has ramifications for how we approach purchasing decisions. As research has demonstrated, we have highly varied reactions to the same thing depending on whether we are confronted with it alone or in combination with other possibilities. We can make an educated judgment on an object's quality when we have other reference points to compare it to; yet, if it's on its own, we're prone to overestimating its value and may wind up overpaying for it.

This study also demonstrates how focusing too much on flaws might affect our judgment when deciding between options. Even while the large set in the dinnerware study had several damaged pieces, it was still worth substantially more than the smaller, mint-condition set. Our inability to see beyond things like these may cause us to overlook perfectly terrific opportunities.

How it all started

Christopher Hsee, a behavioral scientist at the University of Chicago, invented the less-is-better effect. Other researchers have previously explored similar effects: for example, athletes were less joyful after earning a silver medal than they were after winning a bronze medal in a 1995 work by Victoria Medvec, Scott Madey, and Thomas Gilovich.

This and other findings showed that people frequently had contradictory preferences or responded more favorably to inferior alternatives. On the other hand, the less-is-better effect is assumed to operate through distinct processes than other comparable effects. It stands out because it entails a preference reversal when alternatives are offered together rather than individually.

Marketing and the less-is-better effect

This bias has ramifications for how marketers should approach customer happiness measurement. In certain circumstances, marketers may have two versions of a product they wish to evaluate, as Christopher Hsee notes in one of his studies on the less-is-better effect. According to studies, they may get different outcomes if one group of individuals try both goods or two groups sample one version each.

Surprisingly, Hsee recommends that each version be reviewed independently, even though doing so exposes individuals to the less-is-better effect. Why? Because once a product is on the market, purchasers will no longer compare it to the other version that was not chosen. It's more logical to choose the one that performs better in independent tests because that's how customers perceive it.

Explanations

Within the paradigm of bias and variance, certain less-is-more effects may be explained. Prediction mistakes are caused by two factors, according to the bias-variance tradeoff. Consider a decision technique that judges an object outside the sample using a random sample of objects. There are many hypothetical predictions, each based on a distinct random sample, due to sampling variation. The gap between the average of these hypothetical forecasts and the genuine value of appraising is biased. Variance, on the other hand, is the average fluctuation of hypothetical assessments around their mean.

Determinants of variance

The degree to which the choice strategy adjusts to each available sample determines the variance component of judgment error. The amount of free parameters in a strategy is a crucial driver of this degree. As a result, (heuristic) strategies with fewer information and parameters have lower errors from variance than strategies with more parameters.

Determinants of bias

Simultaneously, fewer parameters tend to increase the inaccuracy due to bias, meaning that heuristic techniques are more prejudiced than those that employ more pieces of information. On the other hand, the level of bias depends on the problem to which a decision method is used. The bias can be unexpectedly modest if the decision issue has a statistical structure that matches the structure of the heuristic technique.

For example, when the weights of the linear strategy show specific regularities that were prevalent in many real-life situations, The bias of the take-the-best heuristic and other lexicographic heuristics is equal to the bias of the linear method, according to studies.

Avoiding the less-is-better effect

Because the less-is-better effect is a heuristic – or mental shortcut – consumers should spend more time thinking about their choices to prevent it. Check the following methods:

  • Getting a better understanding of the objective vs. subjective aspects of decision-making.
  • Not passing a single judgment (good or unfavorable) on a product. To make more balanced judgments, consumers should develop the practice of comparison shopping.
  • Taking into account the situation. Avoid dismissing items based on their perceived inferiority whenever feasible. In other words, even though the larger ice cream scoop does not fill the cup, does it contain less ice cream?

Conclusion:

When two alternatives are offered individually, the less-is-better effect reflects the illogical consumer preference for the lesser or smaller option. By neglecting to consider larger settings, it encourages customers to depreciate things that are objectively greater desirable. Slowing down the thought process can help to prevent the less-is-better effect. Consumers should strive for impartiality at all times and resist the impulse to pass isolated good or negative judgments on things.

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