I Always Suspected There Were Too Many Kinds of Toothpaste

I always sort of suspected that the world might be better off with fewer kinds of toothpaste — an intuition that flies directly in the face of all the free-market stuff I usually believe. Now comes Ben Hyde, summarizing Barry Schwartz's book Paradox of Choice, to explain why this intuition might actually be right:

The punch line of Paradox of Choice is made in a simple cartoon. Partition the world into two kinds of people. The maximizers and the satisfiers. Maximizers spend more resources on getting the best possible outcome while satisfiers don't.

The joke? Maximizers do tend to achieve their goals. They do accumulate more than the satisficers. The ironic revenge of the Gods? They are never satisfied.

He reports that depression is highly correlated with maximizing behavior. Then he lays down the cornerstone of the entire book.

Can you conspire to change a person's behavior? Convert them into a maximizer? How? Yes – you just present them with more choices. That increases the chances their behavior will switch from happy satisfier to depressed maximizer. It's a denial of service attack on the problem solver. It's restructuring the game so that the search algorithms are no longer effective. It's the old chestnut that marketing is war. It's the cliche that planning is what you do to avoid action.

In other words, marketers make more choices to turn rational people into shoppers. But these choices make people less happy than they would otherwise be (the paradox).

But wait. This (as opposed to, say, the quest for shelf space) doesn't alone explain why firms make so many different varieties of what's more or less the same product. What's in it for the firm, which presumably forgoes some small economy of scale? Do unhappy consumers spend more money in a quest for more happiness (either in product quantity or quality or price), or do they just spend more time searching? Do they buy eight kinds of toothpaste to try them out? Does the increased search time expose them to more goods that would have chosen to buy had they but known of them, in which case search makes you happier but poorer? Or do the consumers spend so much time searching they buy less? Or is the depressed consumer an impulse buyer? There has to be some mechanism by which the 'more search, less joy' mentality gets translated into goods or this fails to explain the marketers' incentives. And even if a greater variety of toothpaste on offer makes you generally unhappier it's not at all obvious to me how this translates into toothpaste sales given the fixed quantity of mouths per person.

On a related note, the suggestion that there may be an economic grounding for my suspicions about toothpaste makes me hope that someone will be able to confirm my claim of an economic justification for another of my other potentially irrational beliefs. I have a tendency towards comparison shopping for the lowest price, a maximization behavior that my wife likes to laugh at as obsessive (while no doubt enjoying the savings). I like to rationalize this tendency as a public-spirited behavior with positive externalities: by doing my best to embody Rational Economic Man, and finding the low-cost supplier I am rewarding the low-price supplier (and, especially, failing to reward the price gougers) and thus helping the market be efficient, which contributes to lower prices for everyone. Any truth to that in a world of sensible satisficers?

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One Response to I Always Suspected There Were Too Many Kinds of Toothpaste

  1. Ben Hyde says:

    Thanks for the mention!

    The text book reason for product variation is discrimitory pricing; i.e. a variation in the product line can be used to help sort the buying public into buckets that reveal their “willingness to pay.” They talke about the “hidden price” – by which they mean the price the buyer is hiding from them.

    I’ve been amused since writing that. I’ve been asking people about their satisficing behavior. Most people have little rules of thumb they use to reduce their shopping cost. These rule make them happy so it’s not quite fair to label these as “rationalizations.” I’ve noticed that in some of the stories people tell me about their rule of thumb they have an aspect to their rule that explains why it is a selfless contribution to a greater good.

    For example your hope that by leaning toward ‘cheapest’ you are sending a signal back into the great economic engine that will help to train it. I’ll admit to using a similar line in my own reasoning about my moves in this game. Doing our civic duty, getting a bargain, and satisficing – we rule!

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