Confusion from Profusion: Decision Making with Many Options

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DESCRIPTION (provided by applicant): Americans have many alternatives among health and drug coverage plans. This is particularly true for Medicare Part D drug coverage plans. Increased choice usually correlates with a greater chance that an available option will best meet the particular needs of an individual, but an abundance of options may cause confusion and lead to selection errors. The aim of this project is to better understand why individuals often make poor choices when faced with complex decisions, and to suggest guidelines and selection interface designs that improve individuals' decision-making performance. Our experimental approach is to quantify the frequency and magnitude of selection errors when individuals are asked to choose the optimal plan from among a set of competing plans. This decision closely mimics the task of choosing among drug plans that include coverage for some drugs but not others, but also applies generally to other health plan selection choices. The proposed experiment interface will present each subject with a series of matrices each showing the attributes (analogous to the set of covered and not covered drugs) of each selection option (i.e., all available Part D drug plans). Experimental subjects will be asked to select the best plan from among the available options, and will be financially compensated in proportion to the accuracy of their selections. We will systematically examine how subjects' decisions are affected by the complexity of the problems they are facing. Also, variations in the experimental interface will test competing behavioral theories about how people process information and make complex choices, leading the development of a decision-making model against which improved formats can be tested. Central to the experimental design will be a careful investigation of decision-making acumen as a function of demographic factors including education level, sex, and especially age (preliminary work has demonstrated seniors under-perform substantially in complex settings). Subjects will be recruited via in-person visits to seniors' facilities and electronically from among a very large demographically-diverse on-line experimental economics subject pool. Differences among the subject pools and the effect of compensation amount on subject performance will be measured. Project outcomes will include recommendations to policy-makers on structuring complex choices to minimize selection errors. As a result, under-performing groups could be enabled to make better choices about health insurance and drug coverage, improving health outcomes of seniors. Project Narrative: The goal of this project is to further our understanding of the potential for error when people encounter complex decisions, as in the selection of health care and drug coverage plans. This study will examine underlying differences in decision-making acumen between the general population and more poorly performing sub-groups, possibly relating to education level, sex, and especially age. Study outcomes will include recommendations for restructuring decision sets to enable under-performing groups, especially seniors, to make better long-term choices improving their own health outcomes.