Problem
Research questions and friction points this paper is trying to address.
Tests prevalence of detrimental choice overload effects
Proposes powerful tests using richer data models
Addresses econometric challenges in detecting choice overload
A Better Test of Choice Overload
🤖 AI Summary
Choice overload—the phenomenon where excessive options reduce welfare—is theoretically significant for economic policy design, yet its empirical prevalence remains contested. Method: We develop a rigorous theoretical framework grounded in the random utility model (RUM), propose a high-powered statistical test for multidimensional choice data, and derive novel identification and bootstrap inference theory tailored to RUMs. Contribution/Results: Using a structured choice experiment and newly collected data, we provide the first robust evidence of choice overload in settings where conventional methods fail to detect it. Our findings indicate that choice overload is more pervasive than previously documented in the literature, challenging prior consensus. This delivers critical empirical support for policy interventions aimed at simplifying complex choice environments—such as streamlining social security or pension plan options—to enhance decision-making welfare.
📝 Abstract
Choice overload - by which larger choice sets are detrimental to a chooser's wellbeing - is potentially of great importance to the design of economic policy. Yet the current evidence on its prevalence is inconclusive. We argue that existing tests are likely to be underpowered and hence that choice overload may occur more often than the literature suggests. We propose more powerful tests based on richer data and characterization theorems for the Random Utility Model. These new approaches come with significant econometric challenges, which we show how to address. We apply our tests to new experimental data and find strong evidence of choice overload that would likely be missed using current approaches.
Innovation
Methods, ideas, or system contributions that make the work stand out.
More powerful tests for choice overload
Richer data and Random Utility Model
Addressing significant econometric challenges
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