When Smaller Menus Are Better: Variability in Menu-Setting Ability

• 成果类型: Article
• 署名作者: Goldreich, David; Halaburda, Hanna
• 署名单位: University of Toronto; Harvard University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2013.1718
• 发表日期: 2013
• 页码: 2518-2535
• 关键词: menu; menu setting; CHOICE; pension plans; 401(k)

摘要

Are large menus better than small menus? Recent literature argues that individuals' apparent preference for smaller menus can be explained by their behavioral biases or informational limitations. These explanations imply that absent behavioral or informational effects, larger menus would be objectively better. However, in an important economic context-401(k) pension plans we find that larger menus are objectively worse than smaller menus, as measured by the maximum Sharpe ratio achievable. We propose a model in which menu setters differ in their ability to preselect the menu. We show that when the cost of increasing the menu size is sufficiently small, a lower-ability menu setter optimally offers more items in the menu than a higher-ability menu setter. Nevertheless, the menu optimally offered by a higher-ability menu setter remains superior. This results in a negative relation between menu size and menu quality: smaller menus are better than larger menus.