Imagine this: A customer walk into a store looking for a new coat. In this store, she has two coats from which to choose. They have a few differences: they are each a different color, say green and blue; the blue one is made from thinner material; the green one has a larger, more obnoxious logo; the blue one has smaller pockets; the green one is a bit more expensive. Eventually, the customer decides she just has to pick one, so she does. Imagine she chooses the green one.
Later, she wonders if she made the right choice, if she really maximized her utility. She will probably tell herself that the thicker material will make it last longer. It will be warmer, and the blue one would have been too cold. The bigger pockets are better, the blue coat’s pockets would not have been big enough. The logo is a bit much, but it is ultimately tolerable. Overall, she decides that she made the choice that was of a higher relative value. So, yes, she maximized her utility.
But what if she had chosen the blue one?
She would probably tell herself that it was more cost-effective, the green one was probably more expensive than it was worth. The thinner material will make it better for spring, she would have had to put the green one away after the winter ended. The blue coat’s pockets are big enough to get the job done, anything larger might even be considered excessive. And that big logo would have bothered her. Essentially, she would probably tell herself that she made the choice that was of a higher relative value; she maximized her utility.
Is one coat really better than the other? Maybe. Maybe not. However, an individual who has only purchased one cannot know for sure. Instead of worrying about it, they may attempt to rationalize it away by assigning a higher value to the options they chose.
This tendency has been empirically studied. For example, in a study by Mather, Shafir, and Johnson (2000), participants were put in one of three scenarios–interviewing people for a job, choosing a blind date, or selecting a roommate–and asked to choose between two hypothetical options. Then, participants were given tasks requiring them to remember attributes about each of the two options. The study found that “participants were more likely to attribute positive features to the chosen than to the nonchosen options and were sometimes more likely to attribute negative features to the nonchosen than to the chosen option” (136).
This is known as choice-supportive bias or post-purchase rationalization. It is one of many ways in which people reveal their irrationality (see also: availability bias, heuristics, framing, loss aversion, and many more–the ways in which human irrationality manifests itself are seemingly endless). However, as far as cognitive biases go, post-purchase rationalization it relatively harmless. Is it worth spending a lot of time worrying about whether a choice was the absolute best? Perhaps it is better to assume that a past decision was the best that could have been made with the available information and move on.
But I could be trying to rationalize my post-purchase rationalization.
Mather, M., Shafir, E., & Johnson, M.K. (2000). Misremembrance of options past: Source monitoring and choice. Psychological Science, 11(2), 132-138. DOI: 10.1111/1467-9280.00228
I never knew these thoughts had an economic name! I always learn something from these posts.