Richard Koch and Greg Lockwood in Superconnect: Harnessing the power of networks and the strength of weak links (Norton 2010) at 80, refer to psychological studies that find that “we are less satisfied when we have more choices than when we had fewer.” More choices means we pay a higher opportunity cost for the choices foregone and so can more easily regret our eventual pick (See my post of Nov. 13, 2006: decision difficulties when there are too many choices.). If ten law firms propose to handle your work, you might more frequently look back with rue than if only five proposed. This phenomenon explains a bit of the allure of panels. They simplify our choices.
More choices also mean that expectations escalate. It seems only reasonable that with more firms to choose from, or more providers of software, that you should get a better result. Your expectations steadily climb with the wealth of choices. The actual result, therefore, is more likely to disappoint you.
Another aspect of this cognitive and psychological limitation comes from Columbia Mag., Winter 2010-11 at 23. It notes that McKinsey & Co., partly in recognition of studies on the stress caused my multiple choices, has instituted its 3-by-3 Rule. “Never present clients with more than three options at a time.” That rule deserves serious consideration by in-house lawyers when they outline choices for clients.