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Which Is Better: Simultaneous or Sequential Choice?
Organizational Behavior and Human Decision Processes Vol. 84, No. 1, January, pp. 54–70, 2001 doi:10.1006/obhd.2000.2917, available online at http://www.idealibrary.com on
Which Is Better: Simultaneous or Sequential Choice? Daniel Read Leeds University Business School, Leeds, United Kingdom
and Gerrit Antonides, Laura van den Ouden, and Harry Trienekens Erasmus University Rotterdam, Rotterdam, The Netherlands
The term “diversification bias” refers to the tendency for people to take more variety when choosing several items simultaneously than when choosing them sequentially. In this article, we investigate whether this really is a bias by measuring evaluations of sets chosen simultaneously or sequentially. In Experiment 1 participants made two choices between audio tracks for consecutive consumption. Participants liked low-variety sets most and were more likely to choose high-variety sets in simultaneous choice. In Experiment 2 participants chose between three gambles which varied in the probability of winning and their expected value. Again, simultaneous choices seemed worse than sequential ones: The simultaneous-choice groups took far more low expected value gambles than did sequential-choice subjects and rated their enjoyment as lower. We conclude that simultaneous choice often leads to outcomes that are worse than sequential choice and discuss the circumstances when this is likely to be true. 䉷 2000 Academic Press
Thanks to Alexander Gattig, George Loewenstein, and anonymous referees for valuable comments and to Eelco van Asperen, Manon de Groot, and Aswin Zwiers for assisting with the many practical details of implementing and running the experiments. We received funding from the Rotterdam Institute for Business Economic Studies, and the Vereniging Trustfonds Erasmus University. Part of this research was conducted while Daniel Read was at Erasmus University Rotterdam and Leeds University Business School. Address correspondence and reprint requests to Daniel Read, Department of Operational Research, London School of Economics & Political Science, Houghton Street, London WC2A 2AE, UK. E-mail: [email protected], or to Gerrit Antonides, Erasmus University Rotterdam, Room H1633, P.O. Box 1738, 3000 DR Rotterdam, The Netherlands. E-mail: [email protected]. 54 0749-5978/00 $35.00 Copyright 䉷 2000 by Academic Press All rights of reproduction in any form reserved.
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When people choose many options at once they take more variety than when they choose them one at a time. In the first demonstration of this phenomenon (Simonson, 1990), students chose three snacks from a menu of six, one for each of three class sessions. The simultaneous choice group chose all three snacks during the first session, while the sequential choice group chose one snack in each separate class. Simultaneous choice subjects typically took a different snack for each class (e.g., Snickers, peanuts, Oreo cookies), while sequential choice subjects wanted the same snack every time (Snickers, Snickers, Snickers). This finding has proved robust: Read and Loewenstein (1995) replicated it several times using variants on the original procedure; Simonson and Winer (1992) showed that it is consistent with “real-world” behavior (families who purchased the same number of tubs of yogurt took more variety in flavors if they purchased them in one shopping trip than in several trips); and Read, Loewenstein, and Kalyanaraman (1999) generalized the phenomenon to the domain of lottery tickets. Read and Loewenstein (1995) introduced the term diversification bias to refer to the excess variety seeking in simultaneous choice, thus implying that sequential choice is best. Some earlier research appears to support this viewpoint. Read and Loewenstein (1995), for instance, gave their simultaneouschoice subjects a chance to change their mind on the day they received each snack. Many did so and thereby reversed the excess diversification of simultaneous choice. This is consistent with the hypothesis that their simultaneous choices were often “mistaken” and that they welcomed the opportunity to correct these mistakes. Similarly, Simonson (1990) asked participants to rank order all the snacks in order of liking. The average rank of the items in simultaneously chosen sets was lower than that in sequentially chosen ones. While both of these results are consistent with the view that sequential choice is best, they are not conclusive. The first finding, that people change their mind when given a chance, may merely be another demonstration that people choose differently during simultaneous and sequential choice. Since the opportunity to change their mind occurred on the day of consumption, it could be argued that this was a reinstatement of the conditions of sequential choice. Likewise, the finding that the average rank on a liking scale was highest for sequential choices may only show that people make single-item choices based on their single-item preferences. That is, they usually choose their favorite item, where favorite means the item that they like best at that moment. Both findings, therefore, can be seen as further reflections of the phenomenon of greater diversification during simultaneous choice, and neither is inconsistent with the possibility that the global (as opposed to the local) experience of simultaneous choices is better than that of sequential choices. This view is taken by Read, Loewenstein, and Rabin (1999), who suggest that because simultaneous choice enables decision makers to take the “big picture”, they can better choose options that optimize the overall experience, even if some of those options are not the best when taken by themselves. Cases in which local and global preferences differ are commonplace: someone, for
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example, who prefers his black shoes to his brown ones when taken by themselves might still prefer the brown shoes if he knows that he only has a brown belt. It is only when the choice of shoes and belt are made at the same time that the best outfit can be chosen. To the extent that the values of options in the choice set are interdependent, and that this interdependence gets greater attention in simultaneous choice, then simultaneous choice might be best. Variety is one of many possible properties that emerge from the interaction between items in a set. Variety is also a source of pleasure, and therefore a varied set of items might be preferred to a nonvaried one, even when a varied sequence entails occasionally having something that is not your absolute favorite. Ratner, Kahn, and Kahneman (1999) have demonstrated that people often do take “less preferred items for the sake of variety” and that they prefer the results of such choices to a uniform set containing only the most preferred item. It is possible that simultaneous choice enables us to estimate the optimal level of variety, or the best trade-off between more preferred items and more variety, while sequential choices suffer because they encourage exclusive choice of the most preferred item without regard to the composite effect of multiple choices. Variety may only be one of many complementary relationships that are more likely to be perceived in simultaneous choice, and the same principle applies to all these relationships: To the degree that they influence the desirability of a choice set, simultaneous choice can gain an advantage over sequential choice. There is, however, a counterpoint to this principle: If simultaneous choice leads one to overweight a complementary relationship, then it can have the effect of making simultaneous choice worse. It remains, therefore, an open question whether simultaneous choice typically leads to the choice of better sets of alternatives than does sequential choice. In two experiments, we tested whether people rate simultaneously chosen sets as better than sequentially chosen ones. The options were either audio tracks from music and comedy CDs (Experiment 1) or gambles (Experiment 2). We focused on two questions. The first is whether there is an overall difference between the enjoyment of simultaneous and sequential choices. The notion of a bias implies that sequential choices will be preferred. The second is whether high-variety or low-variety choices are preferred. If the bias concerns diversification, then high-variety bundles will be liked less than low-variety ones. A further purpose of our research was to distinguish between two possible explanations for diversification bias. One, which Read and Loewenstein (1995) called choice bracketing, refers to the aforementioned attention to complementary relationships between options: Simultaneous choices are framed as portfolio choices, while sequential choices are framed in isolation (cf. Read, Loewenstein, & Rabin, 1999). According to the choice bracketing hypothesis, the anticipated pleasure from variety is a portfolio-level property that is given more emphasis during sequential choice than during simultaneous choice. A second hypothesis is time contraction, which is that when making simultaneous choices people underestimate the interval that separates each consumption occasion and consequently overpredict how satiated they will become (see
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also Kahneman & Snell, 1990, 1992). Read and Loewenstein (1995) showed that this explained at least part of the diversification bias. They reduced the amount of variety seeking in simultaneous choice by increasing the salience of the interconsumption interval. One group (the day→week group) made two sets of simultaneous choices for three snacks: first for a 1-day interconsumption interval and then for a 1-week interval. The 1-week interval choices of this group were compared with those of a control group that chose for the 1-week interval alone. The day→week group chose less variety. Read and Loewenstein argued that day→week subjects compared the long interval with the short one and that this comparison accentuated the size of the long interval and made it clear how unlikely it was that satiation would last for such a long time. The time contraction hypothesis is that the interconsumption interval is underestimated in simultaneous choice. The impact of such underestimation will be greatest for long interconsumption intervals, and previous studies have either involved a long (1-week) interconsumption interval (Read & Loewenstein, 1995, Experiments 1 and 3; Read et al., 1999a, Experiment 2; Simonson, 1990; Simonson & Winer, 1992, Experimental study) or an indeterminate one.1 Because of these long or indeterminate interconsumption intervals, diversification bias in all these studies could be attributable to time contraction. Time contraction does not, however, predict any overprediction of satiation for very short intervals. Indeed, since people typically overestimate these intervals (Bjo¨rkman, 1984; Fraisse, 1964, 1984) they might even lead to underpredictions of satiation. Therefore, a critical prediction of the time contraction hypothesis is that variety seeking in simultaneous and sequential choice will converge when there is no interconsumption interval or when it is very short. In two experiments reported below, we test whether time contraction is a necessary cause of the diversification bias by comparing sequential and simultaneous choice when the interconsumption interval is almost zero, which we refer to as consecutive consumption. The choice bracketing and exclusive time contraction hypotheses make differing predictions. On the one hand, if choice bracketing is correct, there will still be greater variety seeking in simultaneous than in sequential choice. On the other hand, if time contraction is the sole cause of the diversification bias, this difference will be either eliminated or even reversed. In both experiments reported below we compare sequential and simultaneous choice with consecutive consumption. Experiment 2 incorporates a full 2 ⫻ 2 design with simultaneous and sequential choice crossed with consecutive and distributed consumption. EXPERIMENT 1
Experiment 1 was inspired by a natural experiment. When living in the United States, one of us owned a five-CD changer and so made many simultaneous choices of music. He invariably loaded the changer with a variety of music, 1 In one study with an indeterminate interval, greater variety seeking was observed when a given quantity was bought on a single shopping trip rather than over several (Simonson & Winer,
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some film scores, some rock, some classical. A move to Europe led to the purchase of a new stereo system that played one CD at a time so that CDs were then chosen sequentially. When writing this passage, there were a dozen or so film soundtracks heaped up in front of the single-CD player (almost every one from an Italian movie). These recorded a long series of sequential choices, giving tangible evidence of a near-pathological lack of variety seeking. Experiment 1 was an in vitro replication of this transatlantic study, and the main question it addresses is whether this researcher enjoyed his music more in the United States or in Europe. In Experiment 1 subjects chose two audio tracks to which they would listen consecutively. The menu included two songs from each of three artists and two vignettes from each of three stand-up comics. Subjects chose the two tracks either simultaneously or sequentially. Following a delay, they evaluated the tracks and also rated their variety. Method Subjects. The subjects were 113 staff and students from the faculties of economics and law at Erasmus University Rotterdam. Thirty-five percent were female and their ages ranged from 18 to 32 (mean ⫽ 22). They chose to participate based on requests made in university classes or in response to sign-up sheets that were posted throughout the campus on the days of the experiment. Subjects were paid Dfl.10 (about $5) for participating. Procedure. Subjects were tested in a laboratory containing 15 computers connected to the local network. The experimental program was written in JavaScript and run on Netscape Navigator. The program presented all questions and instructions onscreen, and the audio tracks were played through headphones. Subjects could adjust the volume of the music and answered questions using mouse-clicks. Upon entering the laboratory, and after some brief introductory remarks by the experimenter, subjects seated themselves at a computer terminal. To provide a context for the study, the first screen informed them that in the near future, audio information would be routinely ordered via the Internet and that they would be choosing some pieces in this way, which they would listen to and evaluate later. The program randomly assigned half of the subjects to the simultaneous-choice group and half to the sequential-choice group. Simultaneous-choice subjects were told that they could choose any two pieces they wanted from a menu of 12. Sequential-choice subjects chose their 2nd piece after they had finished listening to their first. The menu consisted of six songs by popular musicians, two each by Celine Dion, Oasis, and Phil Collins, and six short routines by Dutch stand-up comics, two each by Freek de Jonge, Youp van‘t Hek, and Harrie Jekkers. The music 1992). In another, Halloween trick-or-treaters chose more variety when they took two candy bars at the same house than when they took one candy bar at each of two neighboring houses (Read & Loewenstein, 1995).
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and comedy tracks were listed in separate columns on the computer screen. We measured three levels of variety seeking: a choice of two pieces by one artist (least variety seeking), by two artists within the same genre, or from different genres. Subjects next spent 2 mins doing a filler task, following which they gave retrospective evaluations and judgments of perceived variety. All evaluations were done on 7-point scales. First they evaluated how much they had enjoyed the two pieces in combination; they then evaluated the first and second pieces taken alone. Then they stated how much variety they thought there was in the pieces they had chosen. Results and Discussion Variety seeking. The frequency of one-artist, two-artist, and different-genre choices is depicted in Table 1. There were, as predicted, far more differentgenre (high variety) choices in the simultaneous choice condition. We compared conditions with gamma (␥), a measure of correlation for ordinal data which can be interpreted like a t statistic (Hays, 1981). This confirmed that there was significantly more variety seeking in simultaneous than in sequential choice, ␥ ⫽ .37, t(111) ⫽ 2.45, p ⬍ .02. A less appropriate, but more familiar, 2 analysis was also significant: 2(2) ⫽ 6.4, p ⬍ .05. This result is consistent with the choice-bracketing explanation for diversification bias. There was a surprising relationship between choice mode and perceived variety. As can be seen in Fig. 1, perceived variety was higher for simultaneous choice even within two levels of nominal variety: one-artist and two-artist choices. We confirmed this with a 2 ⫻ 3 analysis of variance, with the two levels of choice mode and the three levels of nominal variety as the two factors. There was the expected main effect of nominal variety [F(2, 107) ⫽ 84.1, p ⬍ .001], but there was also a main effect of choice mode [F(1, 107) ⫽ 6.8, p ⬍ .02] and an interaction that approached significance [F(2, 107) ⫽ 2.4, p ⬍ .10]. The near-significant interaction reflected the fact that perceived variety for different genre choices did not differ as a function of condition. The main effect of choice mode did not occur because different choice pairs were chosen in simultaneous and sequential choice. When we focused only on the 22 choice pairs that were chosen at least once in each condition—what we call the common set—the effect of choice mode remained (see Fig. 1). This was confirmed by an additional ANOVA, which showed significant main effects of
TABLE 1 Variety Seeking in Simultaneous and Sequential Choice Variety (%)
Simultaneous Sequential
One-artist
Two-artist
Different-genre
N
20 32
20 32
61 37
56 57
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FIG. 1. Perceived variety as a function of experimental condition and nominal variety for all data and for the common set in Experiment 1.
choice mode [F(1, 61) ⫽ 4.8, p ⬍ .05] and variety [F(2, 61) ⫽ 69.6, p ⬍ .001], but no interaction (F ⬍ 1). Simultaneous choice, therefore, apparently increases perceived variety. This is in line with an earlier discussion of choice bracketing (Read, Loewenstein, & Rabin, 1999), which suggested that people are more likely to take variety into account when making simultaneous choices. In addition to influencing what people choose, however, a focus on variety during choice increases the salience of the variety of simultaneously chosen items when they are being evaluated. Evaluations. We assessed liking of the two pieces by taking the mean of the three measures: the evaluation of both pieces combined, the first piece alone, and the second piece alone. Evaluations for all conditions are depicted in Table 2. A 2 ⫻ 3 analysis of variance, with choice mode and variety as the two factors, revealed a significant main effect of variety [F(2, 107) ⫽ 3.2, p ⬍ .05]: chosen sets containing less variety were remembered as better than those TABLE 2 Evaluations of Chosen Set Variety
All Simultaneous Sequential Common Simultaneous Sequential
Overall
One-artist
Two-artist
Different-genre
5.40 5.44
5.70 5.93
5.12 5.35
5.39 5.11
5.35 5.40
6.06 5.92
5.39 5.74
5.03 5.05
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with more variety. There was no main effect of choice mode or any interaction (both FS ⬍ 1). Although there was no significant interaction between level of variety and choice mode, the effect of variety on evaluation does appear less pronounced for simultaneous choice: the difference between mean ratings for the differentgenre and one-artist choices is 0.31 for simultaneous choice and 0.82 for sequential choice. This change could be attributable to two factors. Perhaps variety is perceived more positively when choices have been made simultaneously rather than sequentially. Alternatively, it may be that there is an item effect— the actual pairs chosen differ under the choice modes, but the desirability of a specific pair is independent of how it is chosen. This question can be answered by referring to the common set. The difference between choice modes is markedly diminished (the ranges are now 1.03 for simultaneous choice and 0.87 for sequential choice), but the effect of variety on overall evaluation remains as strong as ever. A 2 ⫻ 3 ANOVA again revealed a strong main effect of variety [F(2, 61) ⫽ 7.1, p ⬍ .002], but no other effects (both FS ⬍ 1). Thus, it appears that the desirability of given pair of items is not influenced by how it was chosen, but that different items are chosen under different conditions. These results have clear implications for the normative question of whether simultaneous or sequential choice is better. Subjects chose more variety in simultaneous choice, yet they liked low-variety bundles best. The effect of simultaneous choice was apparently to make subjects who might have chosen a uniform but enjoyable pair to take a varied but less enjoyable one. This is consistent with Simonson’s (1990) finding that simultaneous choice subjects took fewer of their favorite snacks and more of their least favorite ones. In his study, as in this one, the effect of simultaneous choice was to lure people away from what they liked best. Experiment 2 further examined the question of whether people prefer their simultaneous or sequential choices through an experiment incorporating an extension of the design of Experiment 1. EXPERIMENT 2
In Experiment 2 we studied the choice of gambles instead of audio tracks. The use of gambles gave us an additional measure of whether people choose best under sequential or simultaneous choice—the expected value of their choices. The measures of interest were how people evaluated their simultaneous and sequential choices, whether they preferred low-variety to high-variety sequences, and if the expected value of their choices were higher under different conditions. We also undertook to replicate the finding of more diversification in simultaneous than in sequential choice even for consecutive consumption. An additional issue examined in this study was whether the choices made and their evaluations would differ depending on how they were experienced. Simonson (1990) found that when people made simultaneous choices of snacks for immediate consumption, they took more variety than when they chose for distributed versus consecutive consumption. In Experiment 2, people chose a
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set of gambles whose outcomes would either be revealed all at once, on the last day of the study, or at a rate of one per day. Subjects Subjects were students at Erasmus University Rotterdam. A list of 1000 students was compiled, of which 192 responded to an initial e-mail shot and were invited to participate over e-mail. Of these, 97 completed the gamble choice part of the experiment, 90 remained long enough to find out the outcomes of their gambles, and 87 completed the questionnaire at the end. The majority of the loss from the initial 97 was in the simultaneous-choice condition: Since they made their choices on the first day, they could complete this part of the task almost immediately. We restricted our analyses to the set of 87 subjects who completed the entire study. It should be noted that of the 14 participants who won nothing, only two did not complete the final questionnaire. Procedure All students received an e-mail advertising the experiment and offering them an opportunity to participate. If they replied we told them that in order to participate they would have to answer our e-mail request on 5 consecutive days, and only those who promised to do so were included in the study. The participants then received one or five e-mails offering them five choices between a set of three gambles: (A) 85% chance of winning Dfl.4 (about $2) and 15% chance of winning nothing [expected value (EV) ⫽ Dfl.3.60]; (B) 55% chance of winning Dfl.8 and 45% chance of winning nothing (EV ⫽ DFl.4.40); and (C) 15% chance of winning Dfl.40 and 85% chance of winning nothing (EV ⫽ Dfl.6.00). Half of the participants chose five gambles at once (simultaneous choice); others chose one gamble on each of 5 days (sequential choice). A payoff distribution showing the expected outcomes of a portfolio of five gambles of each type is depicted in Fig. 2. The height of the line corresponds to the amount of the
FIG. 2. Payoff distribution of a portfolio of five A, B, or C gambles as used in Experiment 2.
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payoff, and the length of a step on that line corresponds to the probability of that payoff. The payoffs are ordered from lowest (zero gambles won) to highest (five gambles won) so that the relative value of each portfolio can be assessed directly. The seconds time stamp on the five e-mail replies determined the outcome of each gamble. For example, for Gamble 1 a time stamp indicating 51 s or less was counted as a win, 52 s or more was counted as a loss. To make sure that they did not try to “rig” the outcome of their choices, participants were informed of this after the completion of the experiment. Participants were sent each day’s instructions in the morning and had until 8:00 PM to reply. The experiment lasted for 5 days. On the 5th day, after all the gambles had been played, participants received an e-mail including a questionnaire to be completed and returned by e-mail. After completing the questionnaire, participants were informed that their winnings could be collected in cash. The experiment used a 2 (simultaneous versus sequential choice) ⫻ 2 (consecutive versus distributed consumption) design. In the Simultaneous/Consecutive condition participants chose five gambles on the 1st day, and they were informed of the outcomes of all the gambles in a single e-mail message on the 5th day. On each of the days in between, they answered a filler question: they stated the probability that it would rain on the following day. The latter procedure was included to make the effort of reading and replying to e-mail the same in the four conditions. In addition, their replies contained the time stamps from which the outcome of that day’s gamble was determined. In the Simultaneous/Distributed condition participants chose five gambles on the 1st day and then learned of the results of one gamble on each of the 5 consecutive days. These participants also answered the weather question to provide the needed time stamps. In the Sequential/Consecutive condition, participants chose a gamble on each day, the results of which were sent back to them on the fifth day in a single email. Finally, in the Sequential/Distributed condition, they chose a gamble and then learned its outcome on the same day. Variety Seeking We measured variety in two ways. First, as the number of different gambles chosen, and second as the number of alternations or switches from one gamble to another (as used by Pessemier & Handelsman, 1985). To illustrate, the sequence ABAAB contained two different gambles and three alternations (from A to B, from B to A, and then from A to B). Because the two measures were highly correlated [r(98) ⫽ .87], and because both are justifiable, we took a simple average of the two indices as our measure of variety seeking. The means for both measures in all conditions, as well as their average—labeled as Variety (All)—is given in Table 3. As can be seen, regardless of how it was measured, there was clear evidence of more variety seeking in simultaneous choice. An ANOVA revealed a substantial main effect of choice mode [F(1, 87) ⫽ 6.0, p ⬍ .02], but no effect of experience mode nor an interaction between choice
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TABLE 3 Measures of Variety Seeking in Experiment 2 Experience mode Measure Alterations Different gambles Variety (All)a Maximizing choices (%) Variety (No Max)a
a
Choice mode Simultaneous Sequential Simultaneous Sequential Simultaneous Sequential Simultaneous Sequential Simultaneous Sequential
Consecutive
Distributed
2.0 1.3 1.4 0.5 1.7 0.9 38 70 2.4 1.9
1.7 1.3 0.8 0.4 1.2 0.9 61 78 2.4 1.9
The average of alterations and different gambles.
and experience (Fs ⬍ 2). As with Experiment 1, these results are consistent with the choice-bracketing hypothesis. The high degree of variety seeking in simultaneous choice was largely driven by the large proportion of people choosing only the high-EV Gamble C in sequential choice. The proportion of these choices is given in Table 3 under the heading “Maximizing choices”. As can be seen, there is an apparent tendency for distributed experience to be associated with more maximizing choices, although a 2 ⫻ 2 ANOVA using maximizing choices as the dependent variable reveals only a main effect of choice mode [F(1, 83) ⫽ 5.9, p ⬍ .02]. Even when subjects who made only maximizing choices are removed from the data, there remains considerable evidence of greater variety seeking in simultaneous choice, as measured by Variety (No Max): [F(1, 31) ⫽ 4.2, p ⬍ .05]. Enjoyment We measured overall enjoyment of the experiment experience in three ways. We asked participants, “How much did you enjoy choosing the gambles?” and “How much did you enjoy the experiment as a whole?” Both were answered using a 7-point scale. In addition, we asked people to state the probability (in percentage terms) that they would participate in a similar experiment in the future. The mean values for all measures in all conditions are given in Table 4. The three enjoyment measures were all highly correlated (mean r ⫽ .52). To extract a single enjoyment measure from the variables we first conducted a factor analysis on the three variables. This analysis yielded one factor that accounted for 69.5% of the covariance of the three variables. The resulting factor scores were then used as our measure of enjoyment. The mean factor scores are given as “Enjoyment” in Table 4. As can be seen, sequential choices were rated as better than simultaneous choices. This was confirmed with a 2 ⫻ 2 analysis of variance, which revealed a significant main effect of choice mode [F(1, 83) ⫽ 6.3, p ⬍ .02], but no other
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TABLE 4 Subjective Measures of Value in Experiment 2 Experience mode Measure Liked experiment Liked choosing Would participate again (%) Enjoymenta Residual b
a b
Choice mode Simultaneous Sequential Simultaneous Sequential Simultaneous Sequential Simultaneous Sequential Simultaneous Sequential
Consecutive
Distributed
4.3 4.4 4.4 5.5 70 79 ⫺0.28 0.16 ⫺0.21 0.09
4.0 4.9 4.5 5.4 75 84 ⫺0.25 0.36 ⫺0.25 .37
The factor score, obtained following a factor analysis of the above three measures. Obtained by regressing Enjoyment on the amount actually earned during the experiment.
effects. One plausible reason for this is that sequential choice subjects liked the experiment more because they made more money. When this was tested with a 2 ⫻ 2 ANCOVA incorporating actual winnings as a covariate; however, the main effect of choice mode remained [F(1, 82) ⫽ 5.6, p ⬍ .02], despite the presence of a large effect of actual earnings [F(1, 82) ⫽ 14.6, p ⬍ .001]. That is, people did like their choices more if their actual earnings were greater, but even when taking this into account they preferred sequential to simultaneous choice. This is illustrated with the Residual variable given in Table 4. This is the residual from the simple linear regression predicting Enjoyment from the amount earned and shows the same pattern as the raw Enjoyment scores. There was some evidence that one factor which caused people to like simultaneous choice less was the variety of their choices. There was a negative correlation between Enjoyment and Variety [r(87) ⫽ ⫺0.19, p ⬍ .05, one-tailed]. This correlation was substantially reduced when the effect of the amount earned is partialed out [r(84) ⫽ ⫺0.11, ns], although it remained negative. Neither Variety nor amount earned can explain all of the difference in the enjoyment of simultaneous and sequential choices. Expected Value of Gambles The form that excess diversification took in this experiment was related to that which Simonson (1990) found in his snack studies. He showed that simultaneous choice led to more people choosing less preferred snacks. Although we did not ask people to rate the gambles, it was clear that during sequential choice people preferred the low-probability, high-payoff Gamble C. The high level of variety seeking in simultaneous choice was partly manifested in more choices of lower payoff gambles. One consequence of this is found in the expected payoff of the gamble portfolios chosen in the different conditions,
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as given in Table 5. As can be seen, expected payoffs were lower for simultaneous than for sequential choice, and there is some suggestion that they are lower for consecutive than for distributed experience. Both of these observations were confirmed by a 2 ⫻ 2 ANOVA. There was a main effect of choice mode [F(1, 87) ⫽ 11.0, p ⬍ .001] and experience mode [F(1, 87) ⫽ 4.4, p ⬍ .04] as well as a near-interaction between the two [F(1, 87) ⫽ 2.8, p ⬍ .1]. The interaction reflects the fact that the combination of simultaneous choice and simultaneous experience led to a portfolio with a particularly low expected value. CONCLUSION
The main question addressed in this article was whether simultaneous or sequential choice is better, where “better” is defined in terms of the degree to which participants like what they choose and in the objective value of their choices. In both experiments, which involved choices in very different domains, sequential choice came out best. In Experiment 1, while there was no significant difference between the choice domains in overall evaluation, respondents did (a) rate high-variety sets as worse than low-variety ones and (b) were more likely to choose high-variety sets in simultaneous choice. In Experiment 2, on the other hand, while the negative relationship between variety on rated enjoyment was quite small, sequential choices were rated as better than simultaneous choices. Moreover, the expected value of the simultaneously chosen gambles was much lower than that of the sequentially chosen ones, an effect due entirely to the increased diversification of simultaneous choice. Overall, therefore, while the precise source of the different evaluations of simultaneous and sequential choice may have differed, neither study offered any evidence that simultaneous choice was better in any way and both suggested that it was worse in at least some ways. While simultaneous choice apparently did lead people to choose “less preferred alternatives for the sake of variety”, there was no compensating increase in their evaluation of the alternatives they chose. The findings of these studies are in apparent contrast to those reported by Ratner, Kahn, and Kahneman (1999). They found that people preferred more varied sequences to less varied ones, even when those less varied sequences
TABLE 5 Objective Measures of Value in Experiment 2 Experience mode Measure Expected value (Dfl.) Proportion EV a
Choice mode Simultaneous Sequential Simultaneous Sequential
Consecutive
Distributed
26.2 28.9 67% 90%
28.1 29.2 83% 93%
a The proportion of the difference between the minimum and maximum expected value: Proportion EV ⫽ (Expected value ⫺ 18)/(30 ⫺ 18).
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contained more of their “favorite” option. For instance, in their Experiment 4, participants listened to several sequences of seven songs, chosen from a menu of three (i.e., some sequences contained less repetition than others). The lowvariety sequences consisted of the favorite song from the menu repeated six times and the second-favorite song played once; the high-variety sequences consisted of the favorite song played four times, the second-favorite song played twice, and the least favorite played once. Although on a song-by-song basis the low-variety sequence dominated the high-variety one, the high-variety sequence got the best overall rating. Ratner et al.’s findings are not, however, incompatible with ours, and the two sets of results combine to suggest how people value diverse experiences. The notion of a diversification bias is not that people do not like variety at all, but rather that during simultaneous choice they take more variety than is good for them. The music sequences studied in Ratner et al.’s research involved very little variety, with even the high-variety sequences containing a lot of repetition. Indeed, the variety in their high-variety sequences was lower than that in the low-variety sequences of Experiment 1. We suggest that the results of the two studies can be arranged in a manner something like that in Fig. 3. The plot of utility against variety takes the form of an inverted U. Too much variety is unpleasant, as is too little. If we compare two experimental conditions on the left-hand side of the function, which we suggest Ratner et al. did, then the high-variety set will be preferred. If we compare two conditions on the right-hand side of the function, which we suggest correspond to our Experiment 1, then the low-variety set will be preferred. The findings are compatible with the idea that people are generally able to achieve the best level of variety just by deciding that they want a change of pace at the moment when they want
FIG. 3. Hypothesized relationship between variety and liking. (1) Proposed pattern of Ratner, Kahn, and Kahneman’s (1999) conditions. (2) Proposed pattern of findings from present article.
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it and then choosing accordingly. To return to the anecdote, with which we introduced Experiment 1, it may be worse to have a five-CD changer than a single-CD player. It is useful to consider the circumstances under which the tendency to choose more variety during simultaneous choice is likely to be beneficial. These are when (a) there are real interactions between options that make diverse sets better than less diverse ones and that are not accommodated during sequential choice and/or (b) the modal tendency in sequential choice is to choose an option which is objectively worse than its alternatives. Neither of these circumstances is likely to be true for choices of snacks and music tracks, and so it is not surprising that in these situations the diversification bias truly appears to be a bias. Both of these prerequisites do, however, occur in many investment contexts. A diverse investment portfolio is usually best because it distributes the risk over many independent alternatives.2 Moreover, because people are risk averse in many investment contexts the tendency to diversify when faced with making many choices may lead them to take on a portfolio offering a higher rate of return.3 In our Experiment 2, the tendency to diversify did not lead to risk reduction because all of the gambles were independent—a portfolio of Gamble C played five times was (statistically speaking) just as diversified as any other combination—and because our participants preferred the highEV gamble when making sequential choices. If our participants had normally preferred the inferior gambles during sequential choice, or if the outcomes of similar gambles were correlated, the diversification bias would have worked in their favor (for a possible example, see Redelmeier & Tversky, 1992). The tendency of simultaneous choices to lead people to spread themselves over the available alternatives, even when some of those alternatives would not be chosen if only one choice was to be made, has been recently discussed by Benartzi and Thaler (1999; Thaler, 1999), Gneezy and Potter (1997), and Rubinstein (2000). In the context of investment decisions, Benartzi and Thaler propose a “1/n heuristic”: if investors are offered n funds in which to invest, they will put 1/n of their available resources into each fund. Because investors are normally reluctant to choose stocks over bonds (Benartzi & Thaler, 1995; Siegel & Thaler, 1997), this means that offering people many similar stock options will lead them to make proportionally greater investments in stocks rather than bonds. Rubinstein (2000) reported a phenomenon closely related to the diversification bias and to the 1/n heuristic. He describes a series of studies in which people guess which of several outcomes will occur on a series of independent trials. Rather than putting all their guesses on the highest probability outcome (the optimal choice) people spread them out, typically in proportion to the probability of the outcomes. When asked to make a single
2
More precisely, diversification reduces risk as long as the correlation between options is not ⫹1. Insurance reduces risk to 0 because it has a correlation of ⫺1 with loss. 3 This risk aversion is due to loss aversion: People prefer bonds over stocks because bonds can never show a nominal loss when they mature (e.g., Lovallo & Kahneman, 2000). In our experiment, none of our gambles had a loss component, and thus loss aversion was not an issue.
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choice, however, most people know that they should put that choice on the highest probability alternative. In sum, therefore, the experiments described in this article suggest that the diversification bias is an apt term for choices in many circumstances. The extra variety that people take in simultaneous choice is probably more than they really want, and there appear to be few advantages to being able to choose all at once. As emphasized in this discussion, however, the range of situations over which too much variety is taken in simultaneous choice, as opposed to too little variety taken in sequential choice, has only begun to be explored. REFERENCES Benartzi, S., & Thaler, R. H. (1995). Myopic loss aversion and the equity premium puzzle. The Quarterly Journal of Economics, 110, 73–92. Benartzi, S., & Thaler, R. H. (1999). Risk aversion or myopia? Choices in repeated gambles and retirement investments. Management Science, 45, 364–381. Bjo¨rkman, M. (1984). Decision making, risk taking, and psychological time: Review of empirical findings and psychological theory. Scandinavian Journal of Psychology, 25, 31–49. Fraisse, P. (1964). The psychology of time. London: Eyre & Spotiswoode. Fraisse, P. (1984). Perception and estimation of time. Annual Review of Psychology, 35, 1–36. Gneezy, U., & Potters, J. (1997). An experiment on risk taking and evaluating periods. Quarterly Journal of Economics, 112, 631–646. Hays, W. L. (1981). Statistics (3rd ed.) New York: Holt, Rhinehart & Winston. Kahneman, D., & Snell, J. (1990). Predicting utility. In R. M. Hogarth, (Ed.), Insights in decision making: A tribute to Hillel J. Einhorn. Chicago: Univ. of Chicago Press. Kahneman, D., & Snell, J. (1992). Predicting a changing taste: Do people know what they will like? Journal of Behavioral Decision Making, 5, 187–200. Lovallo, D., & Kahneman, D. (2000) Living with uncertainty: Attractiveness and resolution timing, Journal of Behavioral Decision Making, 13, 179–190. Pessemier, E., & Handelsman, M. (1984). Temporal variety in consumer behavior. Journal of Marketing Behavior, 21, 435–444. Ratner, R. K., Kahn, B. E., & Kahneman, D. (1998). Choosing less-preferred experiences for the sake of variety. Journal of Consumer Research, 26, 1–15. Read, D., & Loewenstein, G. (1995). Diversification bias: Explaining the discrepancy in variety seeking between combined and separated choices. Journal of Experimental Psychology: Applied, 1, 34–49. Read, D., Loewenstein, G., & Kalyanaraman, S. (1999). Mixing virtue and vice: The combined effects of hyperbolic discounting and diversification. Journal of Behavioral Decision Making, 12, 257–273. Read, D., Loewenstein, G., & Rabin, M. (1999). Choice bracketing. Journal of Risk and Uncertainty, 19, 171–197. Redelmeier, D. A., & Tversky, A. (1992). On the framing of multiple prospects. Psychological Science, 3, 191–193. Rubinstein, A. (2000). A,A,A,A,A or A,A,B,C,D? Over-diversification in repeated decision problems. Working paper, School of Economics, Tel Aviv University. Siegel, J. J., & Thaler, R. H. (1997). Anomalies—The equity premium puzzle. Journal of Economic Perspectives, 11, 191–200. Simonson, I. (1990). The effect of purchase quantity and timing on variety seeking behavior. Journal of Marketing Research, 32, 150–162.
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Simonson, I., & Winer, R. S. (1992). The influence of purchase quantity and display format on consumer preference for variety. Journal of Consumer Research, 19, 133–138. Thaler, R. (1999). Mental accounting matters. Journal of Behavioral Decision Making, 12, 183–206. Received September 4, 1998; published online October 2, 2000
Which Is Better: Simultaneous or Sequential Choice? Daniel Read Leeds University Business School, Leeds, United Kingdom
and Gerrit Antonides, Laura van den Ouden, and Harry Trienekens Erasmus University Rotterdam, Rotterdam, The Netherlands
The term “diversification bias” refers to the tendency for people to take more variety when choosing several items simultaneously than when choosing them sequentially. In this article, we investigate whether this really is a bias by measuring evaluations of sets chosen simultaneously or sequentially. In Experiment 1 participants made two choices between audio tracks for consecutive consumption. Participants liked low-variety sets most and were more likely to choose high-variety sets in simultaneous choice. In Experiment 2 participants chose between three gambles which varied in the probability of winning and their expected value. Again, simultaneous choices seemed worse than sequential ones: The simultaneous-choice groups took far more low expected value gambles than did sequential-choice subjects and rated their enjoyment as lower. We conclude that simultaneous choice often leads to outcomes that are worse than sequential choice and discuss the circumstances when this is likely to be true. 䉷 2000 Academic Press
Thanks to Alexander Gattig, George Loewenstein, and anonymous referees for valuable comments and to Eelco van Asperen, Manon de Groot, and Aswin Zwiers for assisting with the many practical details of implementing and running the experiments. We received funding from the Rotterdam Institute for Business Economic Studies, and the Vereniging Trustfonds Erasmus University. Part of this research was conducted while Daniel Read was at Erasmus University Rotterdam and Leeds University Business School. Address correspondence and reprint requests to Daniel Read, Department of Operational Research, London School of Economics & Political Science, Houghton Street, London WC2A 2AE, UK. E-mail: [email protected], or to Gerrit Antonides, Erasmus University Rotterdam, Room H1633, P.O. Box 1738, 3000 DR Rotterdam, The Netherlands. E-mail: [email protected]. 54 0749-5978/00 $35.00 Copyright 䉷 2000 by Academic Press All rights of reproduction in any form reserved.
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When people choose many options at once they take more variety than when they choose them one at a time. In the first demonstration of this phenomenon (Simonson, 1990), students chose three snacks from a menu of six, one for each of three class sessions. The simultaneous choice group chose all three snacks during the first session, while the sequential choice group chose one snack in each separate class. Simultaneous choice subjects typically took a different snack for each class (e.g., Snickers, peanuts, Oreo cookies), while sequential choice subjects wanted the same snack every time (Snickers, Snickers, Snickers). This finding has proved robust: Read and Loewenstein (1995) replicated it several times using variants on the original procedure; Simonson and Winer (1992) showed that it is consistent with “real-world” behavior (families who purchased the same number of tubs of yogurt took more variety in flavors if they purchased them in one shopping trip than in several trips); and Read, Loewenstein, and Kalyanaraman (1999) generalized the phenomenon to the domain of lottery tickets. Read and Loewenstein (1995) introduced the term diversification bias to refer to the excess variety seeking in simultaneous choice, thus implying that sequential choice is best. Some earlier research appears to support this viewpoint. Read and Loewenstein (1995), for instance, gave their simultaneouschoice subjects a chance to change their mind on the day they received each snack. Many did so and thereby reversed the excess diversification of simultaneous choice. This is consistent with the hypothesis that their simultaneous choices were often “mistaken” and that they welcomed the opportunity to correct these mistakes. Similarly, Simonson (1990) asked participants to rank order all the snacks in order of liking. The average rank of the items in simultaneously chosen sets was lower than that in sequentially chosen ones. While both of these results are consistent with the view that sequential choice is best, they are not conclusive. The first finding, that people change their mind when given a chance, may merely be another demonstration that people choose differently during simultaneous and sequential choice. Since the opportunity to change their mind occurred on the day of consumption, it could be argued that this was a reinstatement of the conditions of sequential choice. Likewise, the finding that the average rank on a liking scale was highest for sequential choices may only show that people make single-item choices based on their single-item preferences. That is, they usually choose their favorite item, where favorite means the item that they like best at that moment. Both findings, therefore, can be seen as further reflections of the phenomenon of greater diversification during simultaneous choice, and neither is inconsistent with the possibility that the global (as opposed to the local) experience of simultaneous choices is better than that of sequential choices. This view is taken by Read, Loewenstein, and Rabin (1999), who suggest that because simultaneous choice enables decision makers to take the “big picture”, they can better choose options that optimize the overall experience, even if some of those options are not the best when taken by themselves. Cases in which local and global preferences differ are commonplace: someone, for
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example, who prefers his black shoes to his brown ones when taken by themselves might still prefer the brown shoes if he knows that he only has a brown belt. It is only when the choice of shoes and belt are made at the same time that the best outfit can be chosen. To the extent that the values of options in the choice set are interdependent, and that this interdependence gets greater attention in simultaneous choice, then simultaneous choice might be best. Variety is one of many possible properties that emerge from the interaction between items in a set. Variety is also a source of pleasure, and therefore a varied set of items might be preferred to a nonvaried one, even when a varied sequence entails occasionally having something that is not your absolute favorite. Ratner, Kahn, and Kahneman (1999) have demonstrated that people often do take “less preferred items for the sake of variety” and that they prefer the results of such choices to a uniform set containing only the most preferred item. It is possible that simultaneous choice enables us to estimate the optimal level of variety, or the best trade-off between more preferred items and more variety, while sequential choices suffer because they encourage exclusive choice of the most preferred item without regard to the composite effect of multiple choices. Variety may only be one of many complementary relationships that are more likely to be perceived in simultaneous choice, and the same principle applies to all these relationships: To the degree that they influence the desirability of a choice set, simultaneous choice can gain an advantage over sequential choice. There is, however, a counterpoint to this principle: If simultaneous choice leads one to overweight a complementary relationship, then it can have the effect of making simultaneous choice worse. It remains, therefore, an open question whether simultaneous choice typically leads to the choice of better sets of alternatives than does sequential choice. In two experiments, we tested whether people rate simultaneously chosen sets as better than sequentially chosen ones. The options were either audio tracks from music and comedy CDs (Experiment 1) or gambles (Experiment 2). We focused on two questions. The first is whether there is an overall difference between the enjoyment of simultaneous and sequential choices. The notion of a bias implies that sequential choices will be preferred. The second is whether high-variety or low-variety choices are preferred. If the bias concerns diversification, then high-variety bundles will be liked less than low-variety ones. A further purpose of our research was to distinguish between two possible explanations for diversification bias. One, which Read and Loewenstein (1995) called choice bracketing, refers to the aforementioned attention to complementary relationships between options: Simultaneous choices are framed as portfolio choices, while sequential choices are framed in isolation (cf. Read, Loewenstein, & Rabin, 1999). According to the choice bracketing hypothesis, the anticipated pleasure from variety is a portfolio-level property that is given more emphasis during sequential choice than during simultaneous choice. A second hypothesis is time contraction, which is that when making simultaneous choices people underestimate the interval that separates each consumption occasion and consequently overpredict how satiated they will become (see
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also Kahneman & Snell, 1990, 1992). Read and Loewenstein (1995) showed that this explained at least part of the diversification bias. They reduced the amount of variety seeking in simultaneous choice by increasing the salience of the interconsumption interval. One group (the day→week group) made two sets of simultaneous choices for three snacks: first for a 1-day interconsumption interval and then for a 1-week interval. The 1-week interval choices of this group were compared with those of a control group that chose for the 1-week interval alone. The day→week group chose less variety. Read and Loewenstein argued that day→week subjects compared the long interval with the short one and that this comparison accentuated the size of the long interval and made it clear how unlikely it was that satiation would last for such a long time. The time contraction hypothesis is that the interconsumption interval is underestimated in simultaneous choice. The impact of such underestimation will be greatest for long interconsumption intervals, and previous studies have either involved a long (1-week) interconsumption interval (Read & Loewenstein, 1995, Experiments 1 and 3; Read et al., 1999a, Experiment 2; Simonson, 1990; Simonson & Winer, 1992, Experimental study) or an indeterminate one.1 Because of these long or indeterminate interconsumption intervals, diversification bias in all these studies could be attributable to time contraction. Time contraction does not, however, predict any overprediction of satiation for very short intervals. Indeed, since people typically overestimate these intervals (Bjo¨rkman, 1984; Fraisse, 1964, 1984) they might even lead to underpredictions of satiation. Therefore, a critical prediction of the time contraction hypothesis is that variety seeking in simultaneous and sequential choice will converge when there is no interconsumption interval or when it is very short. In two experiments reported below, we test whether time contraction is a necessary cause of the diversification bias by comparing sequential and simultaneous choice when the interconsumption interval is almost zero, which we refer to as consecutive consumption. The choice bracketing and exclusive time contraction hypotheses make differing predictions. On the one hand, if choice bracketing is correct, there will still be greater variety seeking in simultaneous than in sequential choice. On the other hand, if time contraction is the sole cause of the diversification bias, this difference will be either eliminated or even reversed. In both experiments reported below we compare sequential and simultaneous choice with consecutive consumption. Experiment 2 incorporates a full 2 ⫻ 2 design with simultaneous and sequential choice crossed with consecutive and distributed consumption. EXPERIMENT 1
Experiment 1 was inspired by a natural experiment. When living in the United States, one of us owned a five-CD changer and so made many simultaneous choices of music. He invariably loaded the changer with a variety of music, 1 In one study with an indeterminate interval, greater variety seeking was observed when a given quantity was bought on a single shopping trip rather than over several (Simonson & Winer,
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some film scores, some rock, some classical. A move to Europe led to the purchase of a new stereo system that played one CD at a time so that CDs were then chosen sequentially. When writing this passage, there were a dozen or so film soundtracks heaped up in front of the single-CD player (almost every one from an Italian movie). These recorded a long series of sequential choices, giving tangible evidence of a near-pathological lack of variety seeking. Experiment 1 was an in vitro replication of this transatlantic study, and the main question it addresses is whether this researcher enjoyed his music more in the United States or in Europe. In Experiment 1 subjects chose two audio tracks to which they would listen consecutively. The menu included two songs from each of three artists and two vignettes from each of three stand-up comics. Subjects chose the two tracks either simultaneously or sequentially. Following a delay, they evaluated the tracks and also rated their variety. Method Subjects. The subjects were 113 staff and students from the faculties of economics and law at Erasmus University Rotterdam. Thirty-five percent were female and their ages ranged from 18 to 32 (mean ⫽ 22). They chose to participate based on requests made in university classes or in response to sign-up sheets that were posted throughout the campus on the days of the experiment. Subjects were paid Dfl.10 (about $5) for participating. Procedure. Subjects were tested in a laboratory containing 15 computers connected to the local network. The experimental program was written in JavaScript and run on Netscape Navigator. The program presented all questions and instructions onscreen, and the audio tracks were played through headphones. Subjects could adjust the volume of the music and answered questions using mouse-clicks. Upon entering the laboratory, and after some brief introductory remarks by the experimenter, subjects seated themselves at a computer terminal. To provide a context for the study, the first screen informed them that in the near future, audio information would be routinely ordered via the Internet and that they would be choosing some pieces in this way, which they would listen to and evaluate later. The program randomly assigned half of the subjects to the simultaneous-choice group and half to the sequential-choice group. Simultaneous-choice subjects were told that they could choose any two pieces they wanted from a menu of 12. Sequential-choice subjects chose their 2nd piece after they had finished listening to their first. The menu consisted of six songs by popular musicians, two each by Celine Dion, Oasis, and Phil Collins, and six short routines by Dutch stand-up comics, two each by Freek de Jonge, Youp van‘t Hek, and Harrie Jekkers. The music 1992). In another, Halloween trick-or-treaters chose more variety when they took two candy bars at the same house than when they took one candy bar at each of two neighboring houses (Read & Loewenstein, 1995).
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and comedy tracks were listed in separate columns on the computer screen. We measured three levels of variety seeking: a choice of two pieces by one artist (least variety seeking), by two artists within the same genre, or from different genres. Subjects next spent 2 mins doing a filler task, following which they gave retrospective evaluations and judgments of perceived variety. All evaluations were done on 7-point scales. First they evaluated how much they had enjoyed the two pieces in combination; they then evaluated the first and second pieces taken alone. Then they stated how much variety they thought there was in the pieces they had chosen. Results and Discussion Variety seeking. The frequency of one-artist, two-artist, and different-genre choices is depicted in Table 1. There were, as predicted, far more differentgenre (high variety) choices in the simultaneous choice condition. We compared conditions with gamma (␥), a measure of correlation for ordinal data which can be interpreted like a t statistic (Hays, 1981). This confirmed that there was significantly more variety seeking in simultaneous than in sequential choice, ␥ ⫽ .37, t(111) ⫽ 2.45, p ⬍ .02. A less appropriate, but more familiar, 2 analysis was also significant: 2(2) ⫽ 6.4, p ⬍ .05. This result is consistent with the choice-bracketing explanation for diversification bias. There was a surprising relationship between choice mode and perceived variety. As can be seen in Fig. 1, perceived variety was higher for simultaneous choice even within two levels of nominal variety: one-artist and two-artist choices. We confirmed this with a 2 ⫻ 3 analysis of variance, with the two levels of choice mode and the three levels of nominal variety as the two factors. There was the expected main effect of nominal variety [F(2, 107) ⫽ 84.1, p ⬍ .001], but there was also a main effect of choice mode [F(1, 107) ⫽ 6.8, p ⬍ .02] and an interaction that approached significance [F(2, 107) ⫽ 2.4, p ⬍ .10]. The near-significant interaction reflected the fact that perceived variety for different genre choices did not differ as a function of condition. The main effect of choice mode did not occur because different choice pairs were chosen in simultaneous and sequential choice. When we focused only on the 22 choice pairs that were chosen at least once in each condition—what we call the common set—the effect of choice mode remained (see Fig. 1). This was confirmed by an additional ANOVA, which showed significant main effects of
TABLE 1 Variety Seeking in Simultaneous and Sequential Choice Variety (%)
Simultaneous Sequential
One-artist
Two-artist
Different-genre
N
20 32
20 32
61 37
56 57
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FIG. 1. Perceived variety as a function of experimental condition and nominal variety for all data and for the common set in Experiment 1.
choice mode [F(1, 61) ⫽ 4.8, p ⬍ .05] and variety [F(2, 61) ⫽ 69.6, p ⬍ .001], but no interaction (F ⬍ 1). Simultaneous choice, therefore, apparently increases perceived variety. This is in line with an earlier discussion of choice bracketing (Read, Loewenstein, & Rabin, 1999), which suggested that people are more likely to take variety into account when making simultaneous choices. In addition to influencing what people choose, however, a focus on variety during choice increases the salience of the variety of simultaneously chosen items when they are being evaluated. Evaluations. We assessed liking of the two pieces by taking the mean of the three measures: the evaluation of both pieces combined, the first piece alone, and the second piece alone. Evaluations for all conditions are depicted in Table 2. A 2 ⫻ 3 analysis of variance, with choice mode and variety as the two factors, revealed a significant main effect of variety [F(2, 107) ⫽ 3.2, p ⬍ .05]: chosen sets containing less variety were remembered as better than those TABLE 2 Evaluations of Chosen Set Variety
All Simultaneous Sequential Common Simultaneous Sequential
Overall
One-artist
Two-artist
Different-genre
5.40 5.44
5.70 5.93
5.12 5.35
5.39 5.11
5.35 5.40
6.06 5.92
5.39 5.74
5.03 5.05
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with more variety. There was no main effect of choice mode or any interaction (both FS ⬍ 1). Although there was no significant interaction between level of variety and choice mode, the effect of variety on evaluation does appear less pronounced for simultaneous choice: the difference between mean ratings for the differentgenre and one-artist choices is 0.31 for simultaneous choice and 0.82 for sequential choice. This change could be attributable to two factors. Perhaps variety is perceived more positively when choices have been made simultaneously rather than sequentially. Alternatively, it may be that there is an item effect— the actual pairs chosen differ under the choice modes, but the desirability of a specific pair is independent of how it is chosen. This question can be answered by referring to the common set. The difference between choice modes is markedly diminished (the ranges are now 1.03 for simultaneous choice and 0.87 for sequential choice), but the effect of variety on overall evaluation remains as strong as ever. A 2 ⫻ 3 ANOVA again revealed a strong main effect of variety [F(2, 61) ⫽ 7.1, p ⬍ .002], but no other effects (both FS ⬍ 1). Thus, it appears that the desirability of given pair of items is not influenced by how it was chosen, but that different items are chosen under different conditions. These results have clear implications for the normative question of whether simultaneous or sequential choice is better. Subjects chose more variety in simultaneous choice, yet they liked low-variety bundles best. The effect of simultaneous choice was apparently to make subjects who might have chosen a uniform but enjoyable pair to take a varied but less enjoyable one. This is consistent with Simonson’s (1990) finding that simultaneous choice subjects took fewer of their favorite snacks and more of their least favorite ones. In his study, as in this one, the effect of simultaneous choice was to lure people away from what they liked best. Experiment 2 further examined the question of whether people prefer their simultaneous or sequential choices through an experiment incorporating an extension of the design of Experiment 1. EXPERIMENT 2
In Experiment 2 we studied the choice of gambles instead of audio tracks. The use of gambles gave us an additional measure of whether people choose best under sequential or simultaneous choice—the expected value of their choices. The measures of interest were how people evaluated their simultaneous and sequential choices, whether they preferred low-variety to high-variety sequences, and if the expected value of their choices were higher under different conditions. We also undertook to replicate the finding of more diversification in simultaneous than in sequential choice even for consecutive consumption. An additional issue examined in this study was whether the choices made and their evaluations would differ depending on how they were experienced. Simonson (1990) found that when people made simultaneous choices of snacks for immediate consumption, they took more variety than when they chose for distributed versus consecutive consumption. In Experiment 2, people chose a
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set of gambles whose outcomes would either be revealed all at once, on the last day of the study, or at a rate of one per day. Subjects Subjects were students at Erasmus University Rotterdam. A list of 1000 students was compiled, of which 192 responded to an initial e-mail shot and were invited to participate over e-mail. Of these, 97 completed the gamble choice part of the experiment, 90 remained long enough to find out the outcomes of their gambles, and 87 completed the questionnaire at the end. The majority of the loss from the initial 97 was in the simultaneous-choice condition: Since they made their choices on the first day, they could complete this part of the task almost immediately. We restricted our analyses to the set of 87 subjects who completed the entire study. It should be noted that of the 14 participants who won nothing, only two did not complete the final questionnaire. Procedure All students received an e-mail advertising the experiment and offering them an opportunity to participate. If they replied we told them that in order to participate they would have to answer our e-mail request on 5 consecutive days, and only those who promised to do so were included in the study. The participants then received one or five e-mails offering them five choices between a set of three gambles: (A) 85% chance of winning Dfl.4 (about $2) and 15% chance of winning nothing [expected value (EV) ⫽ Dfl.3.60]; (B) 55% chance of winning Dfl.8 and 45% chance of winning nothing (EV ⫽ DFl.4.40); and (C) 15% chance of winning Dfl.40 and 85% chance of winning nothing (EV ⫽ Dfl.6.00). Half of the participants chose five gambles at once (simultaneous choice); others chose one gamble on each of 5 days (sequential choice). A payoff distribution showing the expected outcomes of a portfolio of five gambles of each type is depicted in Fig. 2. The height of the line corresponds to the amount of the
FIG. 2. Payoff distribution of a portfolio of five A, B, or C gambles as used in Experiment 2.
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payoff, and the length of a step on that line corresponds to the probability of that payoff. The payoffs are ordered from lowest (zero gambles won) to highest (five gambles won) so that the relative value of each portfolio can be assessed directly. The seconds time stamp on the five e-mail replies determined the outcome of each gamble. For example, for Gamble 1 a time stamp indicating 51 s or less was counted as a win, 52 s or more was counted as a loss. To make sure that they did not try to “rig” the outcome of their choices, participants were informed of this after the completion of the experiment. Participants were sent each day’s instructions in the morning and had until 8:00 PM to reply. The experiment lasted for 5 days. On the 5th day, after all the gambles had been played, participants received an e-mail including a questionnaire to be completed and returned by e-mail. After completing the questionnaire, participants were informed that their winnings could be collected in cash. The experiment used a 2 (simultaneous versus sequential choice) ⫻ 2 (consecutive versus distributed consumption) design. In the Simultaneous/Consecutive condition participants chose five gambles on the 1st day, and they were informed of the outcomes of all the gambles in a single e-mail message on the 5th day. On each of the days in between, they answered a filler question: they stated the probability that it would rain on the following day. The latter procedure was included to make the effort of reading and replying to e-mail the same in the four conditions. In addition, their replies contained the time stamps from which the outcome of that day’s gamble was determined. In the Simultaneous/Distributed condition participants chose five gambles on the 1st day and then learned of the results of one gamble on each of the 5 consecutive days. These participants also answered the weather question to provide the needed time stamps. In the Sequential/Consecutive condition, participants chose a gamble on each day, the results of which were sent back to them on the fifth day in a single email. Finally, in the Sequential/Distributed condition, they chose a gamble and then learned its outcome on the same day. Variety Seeking We measured variety in two ways. First, as the number of different gambles chosen, and second as the number of alternations or switches from one gamble to another (as used by Pessemier & Handelsman, 1985). To illustrate, the sequence ABAAB contained two different gambles and three alternations (from A to B, from B to A, and then from A to B). Because the two measures were highly correlated [r(98) ⫽ .87], and because both are justifiable, we took a simple average of the two indices as our measure of variety seeking. The means for both measures in all conditions, as well as their average—labeled as Variety (All)—is given in Table 3. As can be seen, regardless of how it was measured, there was clear evidence of more variety seeking in simultaneous choice. An ANOVA revealed a substantial main effect of choice mode [F(1, 87) ⫽ 6.0, p ⬍ .02], but no effect of experience mode nor an interaction between choice
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TABLE 3 Measures of Variety Seeking in Experiment 2 Experience mode Measure Alterations Different gambles Variety (All)a Maximizing choices (%) Variety (No Max)a
a
Choice mode Simultaneous Sequential Simultaneous Sequential Simultaneous Sequential Simultaneous Sequential Simultaneous Sequential
Consecutive
Distributed
2.0 1.3 1.4 0.5 1.7 0.9 38 70 2.4 1.9
1.7 1.3 0.8 0.4 1.2 0.9 61 78 2.4 1.9
The average of alterations and different gambles.
and experience (Fs ⬍ 2). As with Experiment 1, these results are consistent with the choice-bracketing hypothesis. The high degree of variety seeking in simultaneous choice was largely driven by the large proportion of people choosing only the high-EV Gamble C in sequential choice. The proportion of these choices is given in Table 3 under the heading “Maximizing choices”. As can be seen, there is an apparent tendency for distributed experience to be associated with more maximizing choices, although a 2 ⫻ 2 ANOVA using maximizing choices as the dependent variable reveals only a main effect of choice mode [F(1, 83) ⫽ 5.9, p ⬍ .02]. Even when subjects who made only maximizing choices are removed from the data, there remains considerable evidence of greater variety seeking in simultaneous choice, as measured by Variety (No Max): [F(1, 31) ⫽ 4.2, p ⬍ .05]. Enjoyment We measured overall enjoyment of the experiment experience in three ways. We asked participants, “How much did you enjoy choosing the gambles?” and “How much did you enjoy the experiment as a whole?” Both were answered using a 7-point scale. In addition, we asked people to state the probability (in percentage terms) that they would participate in a similar experiment in the future. The mean values for all measures in all conditions are given in Table 4. The three enjoyment measures were all highly correlated (mean r ⫽ .52). To extract a single enjoyment measure from the variables we first conducted a factor analysis on the three variables. This analysis yielded one factor that accounted for 69.5% of the covariance of the three variables. The resulting factor scores were then used as our measure of enjoyment. The mean factor scores are given as “Enjoyment” in Table 4. As can be seen, sequential choices were rated as better than simultaneous choices. This was confirmed with a 2 ⫻ 2 analysis of variance, which revealed a significant main effect of choice mode [F(1, 83) ⫽ 6.3, p ⬍ .02], but no other
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TABLE 4 Subjective Measures of Value in Experiment 2 Experience mode Measure Liked experiment Liked choosing Would participate again (%) Enjoymenta Residual b
a b
Choice mode Simultaneous Sequential Simultaneous Sequential Simultaneous Sequential Simultaneous Sequential Simultaneous Sequential
Consecutive
Distributed
4.3 4.4 4.4 5.5 70 79 ⫺0.28 0.16 ⫺0.21 0.09
4.0 4.9 4.5 5.4 75 84 ⫺0.25 0.36 ⫺0.25 .37
The factor score, obtained following a factor analysis of the above three measures. Obtained by regressing Enjoyment on the amount actually earned during the experiment.
effects. One plausible reason for this is that sequential choice subjects liked the experiment more because they made more money. When this was tested with a 2 ⫻ 2 ANCOVA incorporating actual winnings as a covariate; however, the main effect of choice mode remained [F(1, 82) ⫽ 5.6, p ⬍ .02], despite the presence of a large effect of actual earnings [F(1, 82) ⫽ 14.6, p ⬍ .001]. That is, people did like their choices more if their actual earnings were greater, but even when taking this into account they preferred sequential to simultaneous choice. This is illustrated with the Residual variable given in Table 4. This is the residual from the simple linear regression predicting Enjoyment from the amount earned and shows the same pattern as the raw Enjoyment scores. There was some evidence that one factor which caused people to like simultaneous choice less was the variety of their choices. There was a negative correlation between Enjoyment and Variety [r(87) ⫽ ⫺0.19, p ⬍ .05, one-tailed]. This correlation was substantially reduced when the effect of the amount earned is partialed out [r(84) ⫽ ⫺0.11, ns], although it remained negative. Neither Variety nor amount earned can explain all of the difference in the enjoyment of simultaneous and sequential choices. Expected Value of Gambles The form that excess diversification took in this experiment was related to that which Simonson (1990) found in his snack studies. He showed that simultaneous choice led to more people choosing less preferred snacks. Although we did not ask people to rate the gambles, it was clear that during sequential choice people preferred the low-probability, high-payoff Gamble C. The high level of variety seeking in simultaneous choice was partly manifested in more choices of lower payoff gambles. One consequence of this is found in the expected payoff of the gamble portfolios chosen in the different conditions,
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as given in Table 5. As can be seen, expected payoffs were lower for simultaneous than for sequential choice, and there is some suggestion that they are lower for consecutive than for distributed experience. Both of these observations were confirmed by a 2 ⫻ 2 ANOVA. There was a main effect of choice mode [F(1, 87) ⫽ 11.0, p ⬍ .001] and experience mode [F(1, 87) ⫽ 4.4, p ⬍ .04] as well as a near-interaction between the two [F(1, 87) ⫽ 2.8, p ⬍ .1]. The interaction reflects the fact that the combination of simultaneous choice and simultaneous experience led to a portfolio with a particularly low expected value. CONCLUSION
The main question addressed in this article was whether simultaneous or sequential choice is better, where “better” is defined in terms of the degree to which participants like what they choose and in the objective value of their choices. In both experiments, which involved choices in very different domains, sequential choice came out best. In Experiment 1, while there was no significant difference between the choice domains in overall evaluation, respondents did (a) rate high-variety sets as worse than low-variety ones and (b) were more likely to choose high-variety sets in simultaneous choice. In Experiment 2, on the other hand, while the negative relationship between variety on rated enjoyment was quite small, sequential choices were rated as better than simultaneous choices. Moreover, the expected value of the simultaneously chosen gambles was much lower than that of the sequentially chosen ones, an effect due entirely to the increased diversification of simultaneous choice. Overall, therefore, while the precise source of the different evaluations of simultaneous and sequential choice may have differed, neither study offered any evidence that simultaneous choice was better in any way and both suggested that it was worse in at least some ways. While simultaneous choice apparently did lead people to choose “less preferred alternatives for the sake of variety”, there was no compensating increase in their evaluation of the alternatives they chose. The findings of these studies are in apparent contrast to those reported by Ratner, Kahn, and Kahneman (1999). They found that people preferred more varied sequences to less varied ones, even when those less varied sequences
TABLE 5 Objective Measures of Value in Experiment 2 Experience mode Measure Expected value (Dfl.) Proportion EV a
Choice mode Simultaneous Sequential Simultaneous Sequential
Consecutive
Distributed
26.2 28.9 67% 90%
28.1 29.2 83% 93%
a The proportion of the difference between the minimum and maximum expected value: Proportion EV ⫽ (Expected value ⫺ 18)/(30 ⫺ 18).
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contained more of their “favorite” option. For instance, in their Experiment 4, participants listened to several sequences of seven songs, chosen from a menu of three (i.e., some sequences contained less repetition than others). The lowvariety sequences consisted of the favorite song from the menu repeated six times and the second-favorite song played once; the high-variety sequences consisted of the favorite song played four times, the second-favorite song played twice, and the least favorite played once. Although on a song-by-song basis the low-variety sequence dominated the high-variety one, the high-variety sequence got the best overall rating. Ratner et al.’s findings are not, however, incompatible with ours, and the two sets of results combine to suggest how people value diverse experiences. The notion of a diversification bias is not that people do not like variety at all, but rather that during simultaneous choice they take more variety than is good for them. The music sequences studied in Ratner et al.’s research involved very little variety, with even the high-variety sequences containing a lot of repetition. Indeed, the variety in their high-variety sequences was lower than that in the low-variety sequences of Experiment 1. We suggest that the results of the two studies can be arranged in a manner something like that in Fig. 3. The plot of utility against variety takes the form of an inverted U. Too much variety is unpleasant, as is too little. If we compare two experimental conditions on the left-hand side of the function, which we suggest Ratner et al. did, then the high-variety set will be preferred. If we compare two conditions on the right-hand side of the function, which we suggest correspond to our Experiment 1, then the low-variety set will be preferred. The findings are compatible with the idea that people are generally able to achieve the best level of variety just by deciding that they want a change of pace at the moment when they want
FIG. 3. Hypothesized relationship between variety and liking. (1) Proposed pattern of Ratner, Kahn, and Kahneman’s (1999) conditions. (2) Proposed pattern of findings from present article.
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it and then choosing accordingly. To return to the anecdote, with which we introduced Experiment 1, it may be worse to have a five-CD changer than a single-CD player. It is useful to consider the circumstances under which the tendency to choose more variety during simultaneous choice is likely to be beneficial. These are when (a) there are real interactions between options that make diverse sets better than less diverse ones and that are not accommodated during sequential choice and/or (b) the modal tendency in sequential choice is to choose an option which is objectively worse than its alternatives. Neither of these circumstances is likely to be true for choices of snacks and music tracks, and so it is not surprising that in these situations the diversification bias truly appears to be a bias. Both of these prerequisites do, however, occur in many investment contexts. A diverse investment portfolio is usually best because it distributes the risk over many independent alternatives.2 Moreover, because people are risk averse in many investment contexts the tendency to diversify when faced with making many choices may lead them to take on a portfolio offering a higher rate of return.3 In our Experiment 2, the tendency to diversify did not lead to risk reduction because all of the gambles were independent—a portfolio of Gamble C played five times was (statistically speaking) just as diversified as any other combination—and because our participants preferred the highEV gamble when making sequential choices. If our participants had normally preferred the inferior gambles during sequential choice, or if the outcomes of similar gambles were correlated, the diversification bias would have worked in their favor (for a possible example, see Redelmeier & Tversky, 1992). The tendency of simultaneous choices to lead people to spread themselves over the available alternatives, even when some of those alternatives would not be chosen if only one choice was to be made, has been recently discussed by Benartzi and Thaler (1999; Thaler, 1999), Gneezy and Potter (1997), and Rubinstein (2000). In the context of investment decisions, Benartzi and Thaler propose a “1/n heuristic”: if investors are offered n funds in which to invest, they will put 1/n of their available resources into each fund. Because investors are normally reluctant to choose stocks over bonds (Benartzi & Thaler, 1995; Siegel & Thaler, 1997), this means that offering people many similar stock options will lead them to make proportionally greater investments in stocks rather than bonds. Rubinstein (2000) reported a phenomenon closely related to the diversification bias and to the 1/n heuristic. He describes a series of studies in which people guess which of several outcomes will occur on a series of independent trials. Rather than putting all their guesses on the highest probability outcome (the optimal choice) people spread them out, typically in proportion to the probability of the outcomes. When asked to make a single
2
More precisely, diversification reduces risk as long as the correlation between options is not ⫹1. Insurance reduces risk to 0 because it has a correlation of ⫺1 with loss. 3 This risk aversion is due to loss aversion: People prefer bonds over stocks because bonds can never show a nominal loss when they mature (e.g., Lovallo & Kahneman, 2000). In our experiment, none of our gambles had a loss component, and thus loss aversion was not an issue.
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choice, however, most people know that they should put that choice on the highest probability alternative. In sum, therefore, the experiments described in this article suggest that the diversification bias is an apt term for choices in many circumstances. The extra variety that people take in simultaneous choice is probably more than they really want, and there appear to be few advantages to being able to choose all at once. As emphasized in this discussion, however, the range of situations over which too much variety is taken in simultaneous choice, as opposed to too little variety taken in sequential choice, has only begun to be explored. REFERENCES Benartzi, S., & Thaler, R. H. (1995). Myopic loss aversion and the equity premium puzzle. The Quarterly Journal of Economics, 110, 73–92. Benartzi, S., & Thaler, R. H. (1999). Risk aversion or myopia? Choices in repeated gambles and retirement investments. Management Science, 45, 364–381. Bjo¨rkman, M. (1984). Decision making, risk taking, and psychological time: Review of empirical findings and psychological theory. Scandinavian Journal of Psychology, 25, 31–49. Fraisse, P. (1964). The psychology of time. London: Eyre & Spotiswoode. Fraisse, P. (1984). Perception and estimation of time. Annual Review of Psychology, 35, 1–36. Gneezy, U., & Potters, J. (1997). An experiment on risk taking and evaluating periods. Quarterly Journal of Economics, 112, 631–646. Hays, W. L. (1981). Statistics (3rd ed.) New York: Holt, Rhinehart & Winston. Kahneman, D., & Snell, J. (1990). Predicting utility. In R. M. Hogarth, (Ed.), Insights in decision making: A tribute to Hillel J. Einhorn. Chicago: Univ. of Chicago Press. Kahneman, D., & Snell, J. (1992). Predicting a changing taste: Do people know what they will like? Journal of Behavioral Decision Making, 5, 187–200. Lovallo, D., & Kahneman, D. (2000) Living with uncertainty: Attractiveness and resolution timing, Journal of Behavioral Decision Making, 13, 179–190. Pessemier, E., & Handelsman, M. (1984). Temporal variety in consumer behavior. Journal of Marketing Behavior, 21, 435–444. Ratner, R. K., Kahn, B. E., & Kahneman, D. (1998). Choosing less-preferred experiences for the sake of variety. Journal of Consumer Research, 26, 1–15. Read, D., & Loewenstein, G. (1995). Diversification bias: Explaining the discrepancy in variety seeking between combined and separated choices. Journal of Experimental Psychology: Applied, 1, 34–49. Read, D., Loewenstein, G., & Kalyanaraman, S. (1999). Mixing virtue and vice: The combined effects of hyperbolic discounting and diversification. Journal of Behavioral Decision Making, 12, 257–273. Read, D., Loewenstein, G., & Rabin, M. (1999). Choice bracketing. Journal of Risk and Uncertainty, 19, 171–197. Redelmeier, D. A., & Tversky, A. (1992). On the framing of multiple prospects. Psychological Science, 3, 191–193. Rubinstein, A. (2000). A,A,A,A,A or A,A,B,C,D? Over-diversification in repeated decision problems. Working paper, School of Economics, Tel Aviv University. Siegel, J. J., & Thaler, R. H. (1997). Anomalies—The equity premium puzzle. Journal of Economic Perspectives, 11, 191–200. Simonson, I. (1990). The effect of purchase quantity and timing on variety seeking behavior. Journal of Marketing Research, 32, 150–162.
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Simonson, I., & Winer, R. S. (1992). The influence of purchase quantity and display format on consumer preference for variety. Journal of Consumer Research, 19, 133–138. Thaler, R. (1999). Mental accounting matters. Journal of Behavioral Decision Making, 12, 183–206. Received September 4, 1998; published online October 2, 2000