Maintaining Accuracy While Reducing Effort in Online Decision Making: A New Quantitative Approach for Multi-Attribute Decision Problems Based on Principal Component Analysis

Abstract

This paper explores consumer decision making, particularly focusing on the increasing prevalence of choices on the Internet such as online shopping. Examining the fundamental question of how individuals decide how to decide, our paper draws upon the effort–accuracy framework. This framework indicates that people typically consider both the cognitive effort associated with employing a specific decision strategy and the decision quality (i.e., accuracy) implied by using a particular strategy. However, decision strategies with high accuracy imply high effort. Empirical evidence shows that people often use decision strategies that require little effort. As a result, accuracy is often not high. Against this backdrop, this paper introduces a quantitative approach leveraging principal component analysis (PCA) as a decision support tool. Based on a simulation study, the approach demonstrates that it is possible to maintain high accuracy with significantly reduced effort in multi-attribute decision situations where attribute information is available in a quantitative format. This demonstration is based on the example of two decision strategies, which are both theoretically and practically highly relevant: the multi-attribute utility model (MAU) and the elimination-by-aspects strategy (EBA). By employing PCA for dimensionality reduction, the approach becomes particularly advantageous for online shops and online comparison portals, presenting users with concise yet accurate information. It is important to emphasize that our PCA approach is designed for data with a natural ordering, primarily focusing on quantitative variables. Consequently, decision situations where qualitative variables (e.g., product design or color) play a role in the decision-making process will need further exploration in future studies. However, we present a first solution to this problem so that our approach, based on this solution, can be implemented by online shops and online comparison portals in the near future.