Today’s email brings a gripe from Mark Skousen, the irrepressible impresario behind FreedomFest, who could have avoided this problem by being born in the old Soviet Union:
I was in the large Stop & Shop grocery store here in New York to buy some items, including a new tube of toothpaste. I like Colgate, but I can never seem to get the same toothpaste product.
Now I know why. Guess how many different types and sizes of toothpaste Colgate sells?
Ready?
43!
I went through the shelves and counted them, and it’s total madness. In addition to the original Colgate “Great Regular Flavor” toothpaste, they have the following versions to choose from:
Colgate Tartar Protection toothpaste
Baking Soda & Peroxide
MaxClean with Whitening
MaxWhite with Mini Bright Strips
MaxFresh with Germ-Fighting Strips
Total Whitening with Stand Up Cap
Total Advanced
Total Advanced Gentle Care
Total Advanced Fresh & Whitening (New!)
Total Advanced Gum Defense
Sensitive Multi-Protection
Sensitive Enamel/Protect
OpticWhiteAnd in each of the above categories, you get to choose your flavor. There’s….
Crystal Mint
Polish Rush
Intense mint
Clean mint
Gel
Paste
Clean mint paste
mint strip paste gel
Gentle mint
Fresh mint
Sparking mint
Cool mild mintAnd then many of them come in two or three sizes.
The combinations are so complex that I’m sure they offer even more than 43 choices. (By the way, Crest has the same problem — I counted 41 different types and sizes.)
Guess what? I gave up and bought Colgate “Great Regular Flavor” — the original.
As Mark observers, this poses a bit of a challenge to the economist:
In my econ classes and in my “Economic Logic” textbook, I talk or write about how great capitalism is, and how over time it increases the Quantity, Quality and Variety of goods and services. I call it the Q, Q, and V principle. I follow up with assignments to the students on making lists of new products that have recently developed, or old products that are now obsolete, or assigning students to count how many different kinds of bread there are in a local grocery store or types of beer in a liquor store.
…
[But] now [after shopping for toothpaste] I’m having second doubts when it comes to variety. It’s too confusing. I’m starting to think there are too many choices, which can reduce consumer satisfaction.
So: Does this plethora of choices actually benefit consumers? If so, does it create enough benefit to justify the opportunity cost of all the creativity that goes into creating these varieties and flavors? Has the market failed us here, and if so, what exactly is the root cause of that failure? Can we specify the circumstances in which analogous failures either will or will not occur? And if this is indeed a failure, what can be done about it? Or are all cures likely to be worse than the disease?
If you don’t like the selection, shop at Costco.
Monstromart, “Where shopping is a baffling ordeal.”
(http://simpsons.wikia.com/wiki/Monstromart
Honestly, I was prepared to disagree with Skousen (that having some choice is good; but more isn’t necessarily better).
Then I thought about the 1000s of courses and 100s of majors available at the typical State U (most of them being worthless and, probably, adding to the cost of college).
So, perhaps giving your customers everything they want isn’t what they actually want (and hence, not a good business model).
I don’t see what is so confusing. Yes, there may be scores of different kinds of Colgate toothpaste. If you just want to buy what you bought last time I can’t remember, then write it down. If you just want to buy something from Colgate, then pick one. Where’s the confusion?
My IO colleagues say this is entry deterrence: you (over)fill the product space to discourage niche entries. Try cereals next.
http://www.ted.com/talks/lang/en/malcolm_gladwell_on_spaghetti_sauce.html
I relevant talk by Malcolm Gladwell on how business decide on which (and how many) varieties to sell.
Barry Schwartz wrote a good book called The Paradox Of Choice, in which he makes fairly reasonable claims that the plethora of choice we currently have in life is making us more stressed and perturbed.
Yeah, this is just going back to the Schwartz book.
But how is it a detriment to consumers when they can get that minty toothpaste they want, but with whitening and not baking soda?
I think it’s more a failure of filtering at a poorly designed store that Skousen may not have been familiar with than anything else: the paradox of choice gets addressed by having better filters and by more iteration: you get to know exactly where your specific type of toothpaste is on the shelf.
The filtering failure can also be addressed by, say, Amazon, where you can subscribe to toothpaste, and have the exact one you want delivered to your door every 3 months. Technology!
I am willing to believe that it is the past the point of optimal toothpaste variation. Call me back when it is really making consumers worse off though.
A more interesting question is: why are there so many different kinds of toothpaste? If people just end up buying the regular kind then surely they would stop selling the other kinds. So do people actually buy all the different kinds? Or is it a way for colgate to get a lot of space in the supermarket, like a kind of advertising so the whole toothpaste section is taken up by one brand?
Hmmmm, I never see this complaint about wines.
Reminds me of some of the graphs in The Innovator’s Dilemna where the pace of technological improvement increased at a faster rater than market demand. Q, Q, V are all great aspects of capitalsm, but there is a natural limit demanded by the consumer for each category.
There are so many different kinds of toothpaste because manufacturers, after securing a large part of the market, in order to maintain profit margins while maintaining corporate structure, chase increasingly smaller niches of the same market with sustained innovation rather than creating new products for alternative markets through disruptive innovation.
Tim Harford’s book “The Undercover Economist” (http://amzn.to/hlSMAX) has a chapter on “what the supermarkets don’t want you to know”.
It talks about targeting prices to buyers – eg, a real estate agent or used car dealer will size you up to judge how much you’re willing to pay, and tailor a price just for you.
Supermarkets can’t do this directly, so they do it indirectly by offering multiple more-or-less equivalent products at varying prices. Premium prices for price-insensitive consumers, as well as less attractive “budget” items for the price-conscious.
They also make sure they change the prices each week or day, so the price conscious have to pay for the privilege with time and mental effort.
Mike H made the point I was going to. My understanding is that this is a way to discriminate on price without most people noticing. Notice how some of the toothpaste is labelled “Value” and is half the price of the other, almost identical, toothpaste.
Steven — love the photo of Colgate toothpaste at the local grocery story. Too much!
To respond to John W.,
The problem with writing down what Colgate toothpaste I like (or don’t like) is that I often like several types and I just don’t like the aggrevation of wasting time trying to remember all the ones I like and dislike and make that choice for something as mundane as toothpaste.
I asked one of my daughters about this issue of excessive consumer choice. Her response: “This kills me every time I try to get toothpaste! I can never get the one I’m currently on because whatever store I’m in doesn’t carry that exact type. So then I have to adjust to a different one and get used to it and like it and then switch it again. If you’re gonna have a zillion varieties, you need to have them available all the time.”
I think Mike H. and Tim Harford are on to something about the mischievous nature of the store managers. I think they and Colgate-Palmolive are creating a lot of noise in the marketplace with their excessive choices, so I end up buying toothpaste I don’t especially like.
43 different types does not mean they are all distinct. They are probably not very different but may be derivatives of 5 distinct types. That is capitalism’s value because most alternatives will not even get you the first one.
This seems to be more of a failure of supermarket shelves, where you actually have to spot the product you want among the multitudes of other choices (and possibly the naming system – I haven’t a clue what the difference is between Crystal Mint and Sparking Mint – but I really DO like the possibility of having a flavor I actually like).
Instead, shop at Amazon. There is a search function on the left that will narrow down your choices. And when a bunch of choices come up, learn to JUST PICK ONE instead of agonizing just which one might be the very best.
(No, not an employee at Amazon, that’s just an example. I’m sure there are dozens of websites out there to assist you in your toothpaste selection.
My own method of selection is actually even simpler: whatever my wife put on the sink.
Even worse are all those books to read, why there are almost 80 just by Agatha Christie alone. And music? Do NOT get me started on Haydn symphonies!
sounds like you have a classic first world problem on your hands mark. i suggest this solution: eschew toothpaste entirely and go back to brushing your teeth with baking soda.
I think there are two things going on here, one of which might be called “natural” and one might be called “unnatural.”
The natural cycle is one of product line expansion and contraction. Businesses have natural incentives to try variations on established products to see if they appeal to consumers and can increase market share, profit, etc. There’s a counter-balancing contraction that happens once product lines are deemed unprofitable or outdated. It’s a little hard to see this in mass-market consumer products but in industries like cars and computers this cycle is pretty evident.
The unnatural thing is (I am guessing) intellectual property protections. Assuming that these products are protected by government-granted monopolies like patents there is incentive to introduce minor (often insignificant) variants in order to apply for additional or continued patent protection. Again I’m not familiar with whether this happens in the mass market consumer space, but it certainly happens with both prescription and OTC medications.
Another daughter sent this. “I get annoyed by the near constant reinventions of the same old candy and cookies over and over again. Do any of us need Oreos doubled, stuffed, coated, crisped, fudged, puffed, mini-ed, colored, vanilla-ed, caked, etc etc? Do we need Reese in cups, mini cups, mini mini cups, bites, puffs, bars, pieces, carmeled, etc etc?
“Marketing department: ‘what else can we do to our product to get people to buy more more more of what they already don’t need (and isn’t even good for them)? Make it bigger! Make it smaller! Make it darker! Make it lighter! Put it in blue packaging, put it in green packaging. Give us something to launch to get people to buy!’
I wish both marketing people and customers weren’t so dumb.
I’m for conscious capitalism.”
V
I find the choice deflating.
See, I want mint Colgate toothpaste. I want to pick it up and go, on auto-pilot, conserving my decision-making faculties for other matters. But Colgate is complicating my life by compelling me to expend my decision-making energies on trivial things like toothpaste. I’m worse off as a result.
Moreover, I’m not simply getting toothpaste for myself; I’m getting it for my kids, too. And while I can’t discern the difference between Crystal Mint and Sparking Mint, THEY might – and they’ll whine that I didn’t get the right kind. Thus, while the myriad choices may benefit THEM, the choices are a pain in the ass to ME.
In sum, the proliferation of toothpaste options have not provided me with any benefit that I can discern, but have provided me with new opportunities for anxiety and buyer’s remorse. Yippee.
How does shopping for toothpaste compare with shopping for wine? Some people WANT to expend decision-making capacities on wine; they really value the distinctions – or want to imagine/pretend that they do. A choice of wine becomes a public expression of individuality in a way that a choice of toothpaste is not. Other people regard choosing wine as a kind of test engaged in for the benefit of others; these people might well prefer if the multiple-choice test had fewer options. (I subscribe to the philosophy “Great people talk about ideas; average people talk about things; small people talk about wine.”)
What to do about it? Nothing leaps to mind. Basically, my tastes and preferences are somewhat discerning (I want toothpaste; I want Colgate; I want mint), but not as discerning as other people’s. Yes, it might suit me if the world only contained as much detail as interested me, and no more. But I can’t imagine how to create such a world, tailored to each person’s depth of discernment. (I suppose some amount of on-line tailoring of an Amazon page could render me ignorant of the alternatives I don’t care about, reducing my choice anxieties. But this strategy still would not render my kids equally ignorant….)
This from my son (yes, I have five kids, all with opinions on this subject):
Just the other day, Publix stopped carrying the chocolate bar that in my opinion is the best ever made. It’s the Ghiradelli Intense Dark Toffee Interlude. (Obviously, very specific kind) There’s probably 50 other chocolate bars but none of them come close and I am very unhappy that I can no longer get my favorite.
Likewise, the Cape Cod potato chip brand has come out with like 10 new varieties and flavors with their chips. I’m very happy that they did because I thought the regular chips were my favorite, until I tried the Sweet and Spicy Jalapeno kind. However, that kind is often not available in smaller stores that have less shelf space and therefore less variety. I’ll regularly go out of my way to other bigger stores just to get these chips.
The point is, somebody out there could tell me that a regular dark chocolate bar will cut it for me. They could tell me that I don’t need my precious Intense Dark Toffee Interlude. That I don’t need my unhealthy Jalapeno potato chips.
But that’s not their decision to make. If a company wants to put new varieties of their products out there, and I the consumer like them, that’s all that matters.
Everyone can make their own personal decisions about what to buy and what they enjoy.
Perhaps this discussion is merely one variant of the standardization/individualization trade-off.
Do the diversification benefits of having multiple languages/operating systems outweigh the incompatibility problems? Did the creation of a standard electrical current or telephone jack suppress innovation, or provide a platform upon which people could innovate with respect to things OTHER than the industry standard? Are the benefits of having standard sized packets (e.g., for multiplexing and efficient routing) exceed the benefits of having flexibly-sized and individually-addressed packets? While most people who live in my city can efficiently navigate the irregularly-laid-out street grid and irregular pattern of one-way streets, does this outweigh the disadvantages to outsiders that might benefit from a more regular street grid, and two-way traffic? There are costs and benefits to each option.
This looks to be a case of over thinking things. For something that costs so little, how much time do you really need to spend thinking about which one you really want? Opportunity cost indeed. Just grab one. They all work fine.
I go to the store and buy toothpaste willy-nilly. In fact, this is how I buy most things. I haven’t been dissatisfied yet. I simply reach for any Colgate package that’s got a wintergreen flavor. I am picky about the type of floss I get, but again, I don’t spend a whole lot of time thinking about that either. There are only a few things in life I really care about, so take my time on those things. Everything else just needs to be good enough. The trade off in time trying to figure out what is the “best” product for you just isn’t there.
I’m sure there are some who really do care about all the niche toothpaste out there. That’s who all this variety is for. I think one of Skousen’s problems is a problem I see pretty regularly: they want to get the best of everything; they fancy themselves connoisseurs of life. When they get to a product about which they know nothing (which of course is almost everything), they get all flustered. Is it really so hard to admit that you don’t know what is the best product for a given industry? I really don’t understand why people see their own ignorance as everyone else’s problem, as a problem with society in general.
Lastly, if you want the same thing every time, set it up through amazon to have regular deliveries. My advice to Skousen: grow up.
I can buy that more choices might make us more stressed and perturbed: even unhappier overall with our experiences. But I caution that that doesn’t automatically imply that it makes us worse off or that we wouldn’t choose a market with just 1 brand of toothpaste vs. one with 30 brands of toothpaste. People might well choose to be stressed and disappointed in the long run to avoid disappointment (like wasting a trip to the market when it turns out not to carry exactly want you wanted) in the short run, for instance.
@Ken: Great answer. I think you are suggesting being a free rider on those who care about each niche, relying on their behaviour to have been effective to move the niche to something like equilibrium.
I give the same answer when people ask me about recordings of classical music these days. Don’t buy the most expensive, but pretty much everything else is reliable.
I want to put that another way as well: isn’t it possible that people might still get more utility from the IDEA that they have lots of choices than is lost by the actuality that having lots of choices makes them less happy?
Happiness/satisfaction isn’t everything, but as best as I understand it, utility is, or aims to be. That is, “utility” is supposed to take into account _everything_ that matters to us when we think of ourselves/our interests being “better off”, and psychological contentment is only one factor in that. So, potentially, maybe this is one case in which overall happiness and “what we want” aren’t necessarily synonymous, as weird as that sounds.
@Drew: Good point. And don’t forget the extra utility of being able to grump about the poor confused masses oppressed by toothpaste.
See also: if you think it’s bad with toothpaste, it’s even more annoying when it involves a product that you actually care about.
This is why Apple has been eating the PC and cell phone markets alive, and it’s amazing how few people seem to understand why.
As Roger mentioned in his first post, this problem has already been solved by the free market system, in the form of stores such as Costco which hire experts to choose from amongst the myriad brands and presents only a limited selection, all of which generally appeal to the typical mass-market consumer and have a certain minimum quality.
I am current paralyzed by the choice of how much choice I want. Never the less, I think, generally speaking, the general answer will depend the following questions:
(1) To what extend your wife has read to you from the decidedly un-erotic book “50 Shade of Beige,” by Benjamin Moore (“Which do you prefer for the kitchen trim, dear, the ‘Brandstreet Beige’ satin, ‘Almond Pearl,’ ‘Brunswick Beige’ eggshell 25% gloss… ‘Baked Cumin’ … ‘Beige Wheat’…?” Now, same colors, but imagine we painted the trim ‘off-white satin’ instead of ‘cool pearl’!);
(2) How much do you like Trader Joe’s? (And whether limiting selection isn’t the exact ploy Costco uses to get people to overspend.);
(3) Whether you (mis)understand the following: “Somewhere ages and ages hence: Two roads diverged in a wood, and I—I took the one less traveled by, And that has made all the difference.”
This just proves we live in a fine world. When people start bitching about how many kinds of toothpaste we have, we must have solved all the real problems.
“Somewhere ages and ages hence:
Two aisles diverged in a Stop & Shop, and I —
I took the toothpaste less brush-ed by,
And that had been made by Pepsodent.”
Not bad, Bobby Frost; I like this one even more than your Stopping By a Walgreens On a Snowy Evening. But I still wonder if you might want to focus more on naturalistic themes….
I’m amused at the consumers who find this level of choice daunting. But, to Steve’s series of questions, it sounds a bit like the issue in
thebigquestions.com/2012/07/24/mitt-romney-vs-joe-paterno/
You expend the fixed costs to introduce and market a new variation. But, since the marginal costs of production of each variation are about the same (I’m guessing), and the market is fixed (ok, varies with population size, but I’ll ignore that), we have the same or similar “problem.”
I’ve never found too much choice to be confusing. Why does Mr. Skousen believe that just because HE is confused, everyone else must be too?
I hate the taste of garlic, but I don’t scream “market failure!” every time I pass a Lebanese restaurant.
I don’t scream “market failure!” every time I pass a Lebanese restaurant.”
Is that Skousen? Whoever it is I wish he’d stop. It’s gotten so I can’t enjoy my hummus in peace.
This is a non-problem. If you cared enough about getting a specific type of toothpaste, you would probably remember what kind it was.
Also, the internet already solves this problem now in a pretty nice way since you can use amazon (+1 for subscribe and save) or drugstore.com to buy and remember your choice of specific toothpaste. I also suspect that within a few years your smartphone will take care of remembering things like this for you also.
It is all good just buy the cheapest one with fluoride.
Now leftists might have and argument that because of freedom and ignorance some “natural” tooth pastes do not have fluoride and that can leave teeth less protected, but thankfully leftist are unlikely to complain about this because they are more likely to be supporters of anything “natural”.
CJohn #31
Only 50 shades? Sheesh, some people just don’t care about image.
“…when it came time to manufacture the Apple II case, [Steve] Jobs rejected all two thousand shades of beige in the Pantone company’s palette. None was quite right, and if he hadn’t been stopped, he would have demanded a 2001st”
http://www.nybooks.com/articles/archives/2012/jan/12/who-was-steve-jobs/
In a retail store, the main source of rents is shelf space. So large varieties of many consumer products serve as a way of tying up the shelf space to prevent entry from a competitor.
The Crest Baking Soda & Peroxide is my favorite.
Also, interesting toothpaste always now contains an ingredient that induces a tingling sensation. The creator of pepsodent added mint oil and citric acid originally for flavor, but people switched to it because they associated the tingle with extra cleen, so others copied the innovation.
When people complain about too many choices because don’t know which one to choose, I wonder why they don’t solve the problem by making a random choice. That’s what I do.
Too many comments here, most of them saying pretty much the same thing.
Well, just pick one to read and move on already! Problem solved.
I don’t worry too much about the lost creativity — these people are probably maxing out their contribution.
#4 — kudos — yes ‘stuffing the niches’ is a solid marketing strategy (and I assume tweaking the base product to thwart a new entrant preserves net resources).
#41 – I think people may have been just a little starved for a new thread. To broaden it out, I’ve wondered if the “need” for new fashion trends every year is wasteful? My sense is some people (unlike me) get a lot of utility from signalling their savvy awareness of cultural trends…and therefore need continual ways to do this vs. later adopters. I can’t really quibble with it though unless we’re going to start judging the sources of utility.
@dave(comment 18) : http://www.quickmeme.com/meme/3qhh7x/
Re. “The Paradox of Choice”, I used to work in Group Long Term Care insurance. My employer would sell an LTC plan or plans to a company, which would provide us the opportunity to sell LTC coverage to that company’s employees. Our experience was that the more options we offered to the employees, the fewer employees would purchase a policy. Unfortunately, the employers saw it as beneficial to provide their employees with many options, even when we told them that fewer choices were better for the employees.
My wife’s parents were interested in buying LTC insurance, but found the the 20+ packages available to them from my employer too daunting to select from. Later, another company offered them a plan that gave them two options: high and low, and they were able to make a choice.
The irony is that my own employer didn’t take its own advice on restricting options. Our HR department acted just like any other company in offering too many choices to our employees.
This one from my wife: “Jonah Federer says in “How We Decide” that the rational brain is only able to assimilate seven options at once. After that the emotional brain kicks in, and the consumer either makes an impulse decision or walks away without making a choice. We learned that in our marketing campaigns too. So it is odd that Colgate would offer so many different types. It makes comsumer loyalty almost impossible.”
Makes me think of “Don’t Sweat the Small Stuff.”
Consumers have varied, changing and fickle preferences.
[off-topic]
A man was driving along the highway, and in a moment of inattention, lost control of his car. Too late, he swerved, and plowed into a booth at the toll plaza, smashing it to pieces. Nobody was hurt, fortunately, but the man was distraught, looking at the smashed up remains of the booth.
Within minutes, a vehicle with orange flashing lights rolled up, a crew of half a dozen men hopped out, picked up the pieces of the booth and started smearing it all over with a white creamy substance. Before he fully registered what the crew were doing, the booth was fixed! As good as new!
As they hopped back in their truck, he asked one of them, “That was amazing. What was that stuff you used just then?”
He replied, “Oh, that. It’s toll gate Booth paste”
[/off-topic]
@MarkSkousen #47, if Colgate has filled a significant central part of the “toothpaste” sections of the consumer’s mind and the shelf, won’t this effect work in Colgate’s favor?
Like most problems that plague modern society, Richard Feynman solved it decades ago.
http://gifted-problems.tumblr.com/post/28498120027/quoth-physics-idol-richard-feynman-i-got-sick
The Ketchup or Catsup Dilemma: http://www.youtube.com/watch?v=DURrXH02Yhs
Along the lines of #32, these kinds of points usually make me wonder why the optimal world is the standard by which we measure the current one.
Regardless how we structure things, some people will make some decisions that seem weird to some other people. People that run companies such as Colgate will come up with products and business models that seem suboptimal to some, and customers that buy products such as toothpaste will purchase varieties that are bewildering to some other people.
Regardless how many toothpaste companies there are and how many products they make, you could find someone that thinks there are too few of them and someone else that things there are too many of them.
And contrary to common perception, it is not just large companies that make exasperating options. See http://youtu.be/5vvWlZUYVOM — yes, I have met at least one Conrad.
In Barbara Branden’s book on Ayn Rand, she tells the story of how too much choice so frustrated Rand’s sister, she moved back to the Soviet Union, even though both she and her husband knew he would die there due to the lack of medical care available to treat his condition.
The straw that broke the sister’s back; she couldn’t choose which toothpaste to buy and the clerk in the drugstore refused to select one for her.
In the consumer electronics market, the strange thing is often not how much choice you have, but how little. Take smartphones, for example. There’s hundreds of them, literally.
However, leaving aside Apple vs. Android vs. Windows, they all tend to be extremely similar in their features, breaking down into cheap low end, mid-range and expensive high-end. Within one group, smartphones would be pretty much the same.
Notably, they’d all have bad battery life, as ALL manufacturers translate the progress in minituarizing devices into slimming them down instead of improving their usability by giving the battery another 0.5 mm, despite the tremendous dissatisfaction of many consumers with that situation (“iphone battery life” gets 46 million hits).
This has changed only recently, with Motorola suddenly offering the Razr Maxx with twice the normal battery life a couple of months ago.
In general, if you are looking for features, or a combination of features in a consumer electronics product which deviate a bit from the norm, you’ll find that manufacturers really don’t offer much in the way of choice, what you get are 500 very similar products sporting very slight differences.
Notebooks are another example. Try getting a notebook with a reasonable videocard which supports an external monitor at 2560×1440 pixels (via Displayport). There are hundreds of notebooks with good gaming videocards and there are hundreds of notebooks with Displayport. There are virtually none which combine both features (and those there are start at around 1400 dollars).
Patrick Sullivan: “In Barbara Branden’s book on Ayn Rand, …
too much choice so frustrated Rand’s sister, she moved back to
the Soviet Union, even though both she and her husband knew he
would die there due to the lack of medical care available to
treat his condition.
The straw that broke the sister’s back; she couldn’t choose which
toothpaste to buy and the clerk in the drugstore refused to select
one for her.”
**************************************
ummmm…… I read a lot. But I learned a long time ago, to keep
my brain active, which means not accepting everything I read –
(you might ask why I waste my time. Good question!)
“The consumer doesn’t know what he wants. It’s our job to tell him.”
– Steve Jobs
Clearly a market failure. A perfect market requires informed, rational consumers. It is not worth becoming informed about all the toothpaste options (or not possible if we include all consumer choices). Advertising creates associations in the mind that have little to do with consumer satisfaction from the product. Therefore we have un-informed, irrational (to some extent) consumers, and so a perfect outcome is not possible. The outcome must not be efficient.
Can we improve things? That is very difficult. The best way to reduce these inefficiencies is probably through education, so the consumers can act in a more informed and rational way. So direct intereference in the toothpaste market is probably counter productive, but direct interference in education is more justifiable, as it can improve the efficiency of all other markets.
I think the answer is not that 43 toothpaste choices reflects producers responding to consumer wants, but rather the anti-competitive practice of big brands trying to flood limited store shelf space with their product. The consumer is harmed not by too much choice, but by not enough as only the largest toothpaste producers can compete in this way. The result is 86 nearly identical toothpaste “choices” from only 2 manufacturers.
I think people often compare market-solutions as they actually exist with non-market solutions as they only exist in idealistic imagination.
If there was only one toothpaste available, what are the odds that it wouldn’t *also* be a variety you “don’t especially like”, but with the added insult that even if you wanted to switch away from it you wouldn’t have the option?
@Harold,
Why is it ‘clearly’ a market failure? I fail to see it as a market failure at all, let alone clearly one.
Suppose you had a toothpaste zar that decides how many toothpaste varieties we should have. Let us call her Hillary. Assume Hillary is omniscient and beneficent. Do you believe Hillary can devise a situation in which nobody thought there were too many toothpaste varieties and nobody thought there were too few?
Brian is right, but I think the more interesting question is why grocery stores allocate so much space to toothpaste. It seems like they would sell just as much if they carried half the options and allocated the other half of the shelf to unique products that don’t cannibalize the sale of other products in the store.
I think this is a hilarious post, not in the least because I sometimes go through the same thing at grocery stores, and Skousen wrote about it quite well. But I disagree with him on matters of excessive variety.
I worked in a coffee shop while in high school, and we had perhaps two dozen or so sandwiches available at lunch time. The customers would come in, look at the board, sneer and say “Too many choices.” I always wanted to ask them: “How many choices is enough? Ten? Five? One? Would it be good if we just had one solitary sandwich available for lunch?” I never understood the “too many choices” idea. Look at the board > find what you like > order it. It doesn’t matter how many choices there are so long as you are satisfied with the one you ultimately make.
Anyways, it seems odd to suggest, as a few of the commenters have done, that the toothpaste display is wasted space. If it were so, then the store managers would not order so much toothpaste. If they’re making money in spite of (or because of) so many paste choices, then other people have learned to navigate the toothpaste section, so it’s likely you can too. The same principle would apply to the sandwich board at my old coffee shop.
Market Failure? Are you serious Komrade? Why would you think for one minute that Cologate is doing anything other than trying to sell more units (by offering more choices) up to the point that its marginal cost equals the sale price of the last unit sold? The retailers are doing the same thing. They will continue to offer shelf space to Colgate up to the point that the cost of one more inch of shelf space for Colgate toothpaste equals the benefit the store gets from offering their patrons all that variety. And good God, don’t give me any nonsense about the “cost to society” There isn’t one. Colgate’s costs and their retailers costs are someone else’s INCOME. Offering all that variety CREATES JOBS. What’s the alternative? Central Planning? Summers/Obama stimulus. I’ll have another market failure instead, please.
Jerry Melsky:
The question of whether this is a market failure and the question of whether there exists a better alternative are separate questions.
LOL! I feel the same way about deciding which book on economics to buy as Skousen feels about toothpaste. Let’s get rid of most of them — including Skousen’s books, of course — and narrow everyone’s choice to Marx’s “Capital” and Keynes’s “General Theory.” That simplifies things, doesn’t it?
Now I feel less confused and much happier.
Henri Hein: It is clearly a market failure because it cannot operate in the way a perfect market would. In a perfect market choices are made on the basis of informed rationality – people know how things will affect their utulity and decide accordingly. It is impossible to be informed about all the choices, and all but impossible to be rational about it. The outcome of the market cannot be the same as it would be if it were working perfectly, therefore market failure.
Your hypothetical tootpaste tsar does not change this – only seems to make the point that a perfect market is impossible.
I am not claiming that this means we can necessarily make it better – this imperfect market may well be the closest we can actually get to the real thing. However, we should not kid ourselves that we actually have the real thing, nor should we reject any “improvements” out of hand.
In the case of toothpaste the solution is easy. Just grab any of them since they all do much the same thing. Or look for the cheapest.
It seems to me that it isn’t about giving consumers more choices, it’s about taking up more shelf space to aid advertising (which I think Bluto and possibly others noted). Every time Colgate comes up with a new type of tooth paste, they get a bigger section of the shelf so Crest (who are making a nearly identical product) can only compete by getting more shelf space. It doesn’t seem to be a market failure at all, just a unique form of advertising that happens to create what some might see as over-saturation.
Advo was talking about the similarities between modern cell phones, which is what this post made me think about. Cell phones have grown more and more similar over the years, perfectly illustrating Hotelling’s law. So although cell phones and toothpaste can sometimes be too plentiful, both markets seem to follow basic economics, albeit in unique ways.
@Harold,
Neither should we accept any “improvements” out of hand.
You acknowledge that the perfect solution might be unobtainable, and probably not recognizable, yet you hold that the current one is not it. I find that position confusing.
The glut of toothpaste choices *is* a result of informed rationality. All the players involved — the Colgate PMs, the grocery store manager, and the shopper — are acting out of informed rationality. It only does not look rational to you because you do not have the same information as all the other players.
Apologies for coming late to the party.
The bottom line for those with short attention spans of what turned into a really long comment: The mistake is in assessing the costs/benefits of many choices in terms of an individual consumer (usually the one complaining about too much choice) instead of in terms of the remarkably heterogenous range of consumers. It’s not that *you* benefit from having all these choices; it’s that all these choices benefit consumers generally by increasing the likelihood of fulfilling more consumers’ preferences.
And to elaborate: The cost of constraining one consumer’s choices is the risk of making unavailable another consumer’s top choice (or maybe the risk of making unavailable any choice that would be in another consumers top 50% or 10% or . . . ). And don’t forget that even for those complaining about choices, the reality of heterogeneity means that any manufacturer responding to pressure (or regulation) to reduce choices might end up removing the complaining consumer’s top choice/choices from the mix — to the possible net detriment of even that consumer.
The problem, if there is one, is that it seems like it is difficult for individuals to sort through the choices — search costs are high. Obviously, in a more generalized sense, our brains are perfectly capable of sorting through choices; in some sense, every consumption decision is a choice among a near-infinite number of competing options. But of course we have all sorts of cues to sort out those choices. For example, even though there are more choices of general category of food in a supermarket than there are toothpaste choices, when I go to the grocery store I don’t have too much trouble deciding to go to the chip aisle instead of the fruit aisle when my brain “tells” me I want something salty. There are still thousands of choices like this (as well as between different fruits, for example), but few complain about these choices, perhaps because they aren’t generally difficult to process, or, less charitably, perhaps because the complainers don’t mind having lots of fruit options, but are really (as is obvious in the case of Schwartz) making thinly disguised complaints about “commercialism.”
With toothpaste choices, often these cues are (apparently) weaker or absent. This suggests the problem is not “choice” per se, but “too little” marginal difference between choices. Or too little search-cost-reducing marketing.
If this is true, a more valid concern (or a more valid way to express the concerns) these choice critics are expressing is that, ex ante, they don’t know if the differences between the options are too marginal to merit the costs of deciding between them (otherwise self-help in the form of “close your eyes and grab one” would be an easy answer). Thus the complaint is really, “The investment in initial search costs turns out to be higher than the payoff, but I have no way of knowing this until I have incurred those costs.”
If that’s true, then for any charge of market failure to stick, we also have to investigate whether search-cost reducing tools are available and add into the calculation the opportunity cost and benefits of these.
Perhaps, on net (but apparently not distributed equally across all people (unsurprisingly)), the social benefit of fulfilling more consumers’ preferences coupled with the various mechanisms available to reduce search costs outweigh the costs of developing all those choices and developing those search-cost-reducing tools.
I think this is likely. I think there is enormous social value in fulfilling heterogenous preferences, and where this imposes some countervailing costs on some individuals, the market does a good job of offering cost-reducing tools (read: the Internet).
So I would say that the “problem,” if there is one, is perhaps not in the availability of options per se, but in inefficiently high search costs. Perhaps manufacturers are insufficiently distinguishing between the choices (in packaging, product placement, product names, etc. — marketing) in a way that would more readily tap into our innate ability to differentiate options and process our preferences. Perhaps the market isn’t offering efficient tools to aid in this.
Put differently, maybe the “problem” is with the advent of supermarkets and big box retailers and insufficiently niche marketing (which may be the “fault” of retailers more than manufacturers).
But if these are the “problems” then the most stark trade-off between status quo and obvious fixes is between broader preference fulfillment and the convenience and efficiency of mass marketing, supermarkets, etc. (which in turn presumably makes feasible the investment in creating so many options), and the opportunity costs of differentiated product creation and the search costs inherent in the status quo. I don’t think it’s even a close call.
By not investing in perfectly conveying all product differences with excessive marketing, manufacturers (and/or retailers) reduce opportunity costs lost to excessive marketing. By offering lots of marginally different products, manufacturers are not likely incurring enormous opportunity costs in creating the different options, because each new product is only marginally different than previous ones. At the same time, they are are increasing consumer utility by increasing the range of options presented to heterogenous consumers. By selling similar but differentiated products in a single store, supermarkets reduce (enormously) a whole host of costs (including, almost certainly, what would be even larger search costs!). Of course I don’t know for certain that the resources spent developing an additional type of toothpaste couldn’t be better spent elsewhere, but there is zero evidence to suggest it could, and no good reason to think that manufacturers and investors are leaving $20 bills laying on the ground all over the place.
So to get back to the original point – I think the perceived problem here is one of perception. To show my atheist stripes, it’s a little like the hubris of the devout believer praying to god for something, which implies that his own wants merit top priority (perhaps this is countered by omniscience and omnipresence (no scarcity!), but then why waste time asking god for anything in the first place if he is omniscient?). The consumer who thinks we have “too much choice” because *he* is inconvenienced by having to choose similarly implies that others’ preferences are not as worthy, and should be constrained for his sake.