Too many options impair consumers' ability to make best choices

A new study has found that too many choices can impair consumers from making appropriate decisions and erode their ability to determine the optimal choice for them.

Columbia Business School Professor Sheena Iyengar, S. T. Lee, Professor of Business Management, and Emir Kamenica, Associate Professor of Economics, from the University of Chicago Booth School of Business, were behind the study.

They found the more fund options an employee has to choose from when presented with 401k options deters him or her from enrolling in the plan.

In addition, the study revealed that employees under 30 years of age are as likely as others to allocate no money at all to equity funds and their participation in equities is just as sensitive to the number of funds as that of older employees.

The findings are of particular economic significance, as non-participation in the stock market, especially for younger employees, is likely to be detrimental to one’s retirement income.

The study was published in the Journal of Public Economics.