The Decoy Effect: Pricing Using Alternatives

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🔥NEW While lining up at a movie theatre to buy some popcorn you are feeling very hungry. So you intend to buy a medium-sized bag of popcorn. But when you get to the counter, you see a small one costs $4; the medium is $7.50; and the large is $8. You don't really need a whole large popcorn, but you end up buying it anyway, because it's a much better deal than the medium. This is what is known with the Decoy Effect. it is an interesting cognitive illusion in the way we make decisions and stands as an example of irrational decision making. The decoy effect is the phenomenon whereby consumers will tend to have a specific change in preference between two options when also presented with a third option that is asymmetrically dominated. In simple terms, when deciding between two options, an unattractive third (middle) option can change the perceived preference between the other two, typically in favor of the more expensive one. By introducing a third unpopular option, the decoy effect can ca (...) Read more? Sign up for free