The decoy effect, also known as the asymmetric dominance effect or the attraction effect, is a cognitive bias observed in decision-making and consumer behavior. It occurs when the introduction of a third, less attractive option influences individuals to change their preference between two existing options in a way that benefits one of those options.
This effect takes advantage of the human tendency to rely on relative comparisons when making choices, rather than evaluating options in absolute terms. The decoy option is strategically designed to make one of the original options appear more appealing by comparison, leading individuals to perceive it as a better choice.
An example to illustrate the decoy effect
Imagine you’re at a movie theater considering two popcorn options:
- Option A: Small popcorn for $4
- Option B: Large popcorn for $7
Now, let’s introduce a decoy option:
- Option C: Medium popcorn for $6.50
The presence of the decoy option C makes option B (large popcorn) appear more attractive in comparison. Before, you might have been inclined to choose the cheaper small popcorn (Option A). However, now that you see the medium popcorn (Decoy C) priced closer to the large popcorn (Option B), the large popcorn might seem like a better deal due to the perceived increase in value.
In this scenario, the decoy option C doesn’t need to be chosen by anyone; its purpose is to influence perceptions and preferences between the other options.
The decoy effect is commonly used in marketing and sales to influence consumer choices. By carefully designing the attributes and pricing of options, businesses can guide customers toward certain choices that benefit their bottom line. The effect highlights the importance of being aware of the context in which choices are presented and the potential for external factors to sway decisions.
One of the most well-known companies that use the decoy effect is Starbucks with their 3-option when you want a coffee. This consists of three possible sizes of coffee to pick, the first one is cheaper and small, the second one is more expensive and with medium size and the third option is a slightly more expensive than the second option but with a bigger size. Most of the people will tend to choose the third option and almost nobody the second one.
