Should You Decide Now or Wait for A Better Offer?
Whether it is searching for flights, buying a car, or finding a new apartment, the same question always arises: Should I grab the first offer that appeals to me or wait until a better offer comes along?
A new study finds that people often find it difficult to make decisions when options are presented not simultaneously, but one after another. This becomes even more difficult when time is limited and an offer that you turn down now may no longer be available later, according to researchers.
“We have to make decisions like this countless times every day, from the small ones like looking for a parking space to the big ones like buying a house or even choosing a partner,” said Christiane Baumann, a doctoral candidate in the Department of Psychology of the University of Zurich in Switzerland. “However, until now, the way we behave in such situations has never been thoroughly examined.”
For the new study, Baumann carried out several experiments to investigate this issue.
Baumann simulated purchasing situations with up to 200 participants in each experiment to discover what strategies people use. In one test, the participants were told to try to get a flight ticket as cheaply as possible. They were given 10 offers one after the other in which the price fluctuated, as the fictional departure date was getting nearer and nearer. In another test, people had to get the best possible deal on products, such as groceries or kitchen appliances, with the fluctuating prices taken from an online retailer.
Using the results, she then developed a simple mathematical model for the strategy that people use when they make decisions.
She notes that it is easy — using a computer — to find the best-possible process for making decisions of this type.
“But the human brain is not capable of carrying out the complex calculations that are required, so humans use a rather simplified strategy,” she said.
Analyzing the experiment results confirmed that the test participants did not use the optimal, yet complex, strategy calculated by the computer. Instead, Baumann discovered that they use a “linear threshold model.”
“The price that I am prepared to pay increases every day by the same amount. That is, the further along I am in the process, the higher the price I will accept,” Baumann explained.
This principle can be applied not only to purchasing decisions, but also other situations, such as choice of an employer or a life partner.
”At the beginning perhaps my standards are high,” she said “But over time they may lower so that in the end I may settle for someone I would have rejected in the beginning.”
Baumann’s mathematical model describes human behavior in various scenarios.
“That helps us to better understand decision making,” she said. “The model also allows us to predict the circumstances in which we tend to buy a product too early or when we delay too long and then have to take whatever is left in the end.”
Baumann said these findings could help people make difficult decisions in future.
“In the current digital world the amount of information available for decision making can be overwhelming,” she said. “Our work provides a starting point for a better understanding of when people succeed or fail in such tasks. That could enable us to structure decision making problems, for example in online shopping, in such a way that people are supported in navigating the flood of data.”
During the study, Baumann worked under the leadership of cognitive psychologist Bettina von Helversen, who was previously at the University of Switzerland, but is now at the University of Bremen in Germany, and in collaboration with Professor Sam Gershman of Harvard University in the United States.
Source: University of Zurich
Wood, J. (2020). Should You Decide Now or Wait for A Better Offer?. Psych Central. Retrieved on August 3, 2020, from https://psychcentral.com/news/2020/06/22/should-you-decide-now-or-wait-for-a-better-offer/157530.html