Sunday, January 31, 2010

When Phones Are Just Too Smart

New York Times article "When Phones Are Just Too Smart" (January 29th, 2010) seems to misunderstand the purpose of an applications marketplace:
The next generation of gadget users might prove different, but for now it is clear that people prefer fewer choices, and that they gravitate consistently toward the same small number of things that they like. Owners of iPhones are no different from cable TV subscribers with hundreds of channels to choose from who end up watching the same half-dozen.

First, Apple's purpose is to make profit. Apple will continue to add more applications until it becomes unprofitable for them to do so. Though there is behavioral evidence that too much choice in one product may overwhelm consumers, as in Sheena Iyengar and Emir Kamenica's 2008 working paper "Choice Proliferation, Simplicity Seeking, and Asset Allocation," or Sheena Iyengar and Mark Lepper's 2000 Journal of Personality and Social Psychology paper, to Corrections, iPhone applications seem to be quite differentiated products. Take the example the Times offers: cable and satellite television has many channels. When it comes to whether that number is efficient, the question is not whether all individuals like to watch only a few channels. The question is whether all individuals only like to watch the same few channels.


  1. Let the record also reflect that arguing that people don't value a longer menu of choices based on the number of apps they download is only slightly less nonsensical than arguing that people don't value a longer menu of dishes based on the fact that they still only ever order 1 entree.

    Quality and quantity can be friends when all you care about is the upper tail.

  2. Corrections agrees with your main point, wheninrome15. However, it is important to recognize when individuals are constrained. In the case of a single restaurant sitting, they are constrained on the extensive margin--that is, they do not order more meals. Instead, they make decisions on the intensive margin of food quality and the extensive margin of more meals at a restaurant over a time period.

    In your example, individuals are largely constrained only on the intensive margin. They benefit from more menu items.

    Corrections agrees with your example in a different light--this may have been your original intent, given your last sentence. We envision an individual-specific quality distribution of applications. When looking at a number of applications, an individual observes more "pulls" from their quality distribution.

    Not only will the number of high-quality applications increase, but as we take more pulls from a quality distribution, the average quality-level conditional on being high quality also increases.

    Therefore, if quality-level is uncertain, even if everyone chooses the same five applications to have on their iPhone, taking the highest five of one million will have a higher (or equal) quality level than taking the highest five of one hundred.

    A good point from wheninrome15--Corrections focused on heterogeneity of consumer, when that indeed is not even necessary for more applications to generate higher levels of consumer felicity!

  3. While people may only watch a sub-setof the available cable channels the point is that the specific subsets chosen by different individuals differ from each others. Ditto phone apps. Ditto computer applications. Different strokes for different folks - and that is why we have a plethora of offerings.

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