Elementary economics tells us that a good decision is to maximize utility (satisfaction). Utility refers to how desirable a task or choice is for an individual. Maximizing are people who strive to get the very best out of every decision. But, are they happy with their final choices?
A key assumption in economics is the notion that individuals are mostly rational, and armed with complete information about their choices. Rational individuals will always choose the option that maximizes their satisfaction. That is, they approach decision-making with the goal of achieving the best possible outcome. In order to accomplish this, they are willing to engage in an exhaustive search of all possible options, investing substantial time and effort in the process.
Behavioral economists, however, have shown the limits of this maximizing behavior. It is almost impossible to examine each and every available option due to the limitations in human cognition. More than half a century ago, Herbert Simon (1957) argued that the goal of utility maximization, as formulated by rational choice theory, is nearly impossible to achieve in real life. He proposed that decision makers should be viewed as bounded rational, and offered a model in which utility maximization was replaced by satisficing.
Satisficing are individuals who are pleased to settle for a good enough option, not necessarily the very best outcome in all respects. A satisficer is less likely to experience regret even if a better option presents itself after a decision has already been made. Compared to satisficers, maximizing individuals are more likely to experience lower levels of happiness, regret, and self-esteem. They also tend to be perfectionist.
Consider, for example, a choice of college. In order to determine their optimal decision outcome, maximizers feel compelled to examine each and every alternative available. Maximizers rely heavily on external sources for evaluation. Rather than asking themselves if they enjoy their choice, they are more likely to evaluate their choices based on its reputation, social status, and other external cues. In contrast, statisficer asks whether her college choice is excellent and meets her needs, not whether it is really “the best.”
Overall, maximizers achieve better outcomes than satisficers. For example, a study found that recent college graduates with high maximizing tendencies accepted jobs that paid 20% higher starting salaries than their satisficing peers. Despite higher salaries, however, these maximizing students were less satisfied with the jobs they accepted. Why? Once maximizers have made a choice (e.g., a job offer), they are likely to second guess themselves, and wonder whether they could have made a better choice. They are more prone to make social comparisons in order to gauge the optimality of their decisions.
Another key problem with maximizing is when the decider faces an abundance of option. For example, Schwartz (2004) showed that when shoppers had to choose among 20 choices of jams (or 6 pairs jeans) experience conflict and are less satisfied with their final selection. But, they are likely to be more satisfied with a fewer selection. Too many attractive options make it difficult to commit to any choice, and after the final selection one remains anxious about the missed opportunities (may be the other pair of jean was a better fit).
In short, when we face too many attractive choices we feel anxious about missing out. We are terrified of missing out on anything that looks exciting. Indeed, evidence shows that those provided with fewer options in a decision-making task derived greater satisfaction from their decision outcomes.
The take home lesson is that to make “best” choices, listen to your gut feelings, don’t worry about getting the very best all the time, and evaluate each outcome on its own merits rather than against others.