Braess’ Yourself: Too Many Choices
A group of Computer Scientists in The Netherlands revealed a new version of Braess’ paradox that occurs in social networks, stating that people choose products based on the decisions made by their friends. They’ve shown that adding extra products can actually reduce the outcome for everyone, and limiting products can lead to better outcomes for everyone.
One of the most common examples of Braess’ paradox is seen in traffic congestion. In the traffic example, Braess’ paradox states that adding an extra road to a network can actually create congestion while removing—or closing—a road can relieve traffic congestion.
We know this applies to traffic networks, but we may not be aware of how we interact with Braess’ paradox in our daily lives. Referring to the product paradox, we can intuitively see how this makes sense, but we may not be fully aware of how much we interact with Braess’ paradox in our daily lives.
Braess’ Product Paradox
Amazon, arguably the most customer-focused company to ever exist, has created an invaluable product that we’ve all likely used. Has there ever been a time where you’ve simply felt overwhelmed with the number of selections available? Is it safe to say that the vast number of selections to choose from made it nearly impossible to make the optimal choice?
Personally, I can think back to a recent example at the grocery store. When walking through the toothpaste isle, I couldn’t help but consider all of the options available. I spent some time searching, and I most likely settled on a familiar brand that was placed eye-level on the rack.
However, a few months ago, I went on a camping trip with some friends. I forgot my toothpaste, and we pulled into a small gas station in hopes of finding some. The gas station had but one choice, so I purchased the toothpaste and went on about my day.
I mentioned two extreme examples on both ends of the spectrum, but this shines a light on Braess’ paradox in our every day lives. I’m sure you can consider a time where this was absolutely true in your life.
So, what does this tell us about market dynamics?
Do smaller stores offer consumers better outcomes than their competing giant retailers?
Do you feel more certain about a decision when that decision becomes more complex?