Decoy Effect

The decoy effect, also known as the asymmetric dominance effect, is a cognitive bias where people’s preference for an option changes when presented with a third option that is strategically designed to be inferior to one of the original options.

Explanation

The decoy effect occurs when a third option, known as the decoy, is introduced to manipulate the decision-making process of individuals. The decoy is carefully constructed to be less desirable than one of the other options, known as the target, in terms of certain attributes or features. This manipulation is aimed at altering the decision-maker’s preference towards the target option, making it appear relatively more attractive compared to the decoy.

Example

For example, when purchasing a laptop, a consumer is presented with two options: a basic model priced at $500 and a high-end model priced at $1500. The majority of consumers may find the high-end model too expensive and opt for the basic one due to its affordability. To influence the consumer’s choice, a decoy option is introduced – a slightly improved version of the basic model priced at $1000. This decoy now makes the original basic model appear more appealing, as it appears as the best value for money compared to the decoy and the expensive model. Consequently, the consumer may be more likely to choose the basic model instead of the high-end model or the decoy.

Significance

The decoy effect can be commonly observed in marketing, sales strategies, and even in political campaigns. By strategically manipulating the options available, businesses and individuals can influence decision-making processes and steer consumers towards certain choices. Understanding the decoy effect allows marketers and decision-makers to influence consumer behavior and optimize their offerings to achieve desired outcomes.