How does a shoe shopper decide what type of shoe to buy? How can that customer possibly make the best decision in the face of so many choices—within a reasonable amount of time?
The consumer in today’s economy has an almost limitless variety of products to choose from. This abundance of variety creates a paradox of choice, says Professor Antony Davies and graduate student Erika Davies in this new Learn Liberty video.
In order to choose which product to buy when they are faced with so many options, Antony and Erika explain that people use heuristics, or shortcuts, to make more efficient decisions.
One example of a heuristic is when people use other people as proxies, like asking friends or family for recommendations on what college to attend. By applying the experiences of others we are able to make a more informed decision for ourselves. We see this occurring on a large scale in the form of product reviews on sites like Amazon or Yelp.
Another shortcut is to judge alternatives based on current experiences. This idea can be illustrated in dating decisions. We often compare our current relationships to new potential candidates in order to decide if it is better to date someone else—or to not be dating at all!.
Consumers may never find the perfect choice, but by using heuristics, people can make more informed decisions without facing analysis paralysis.