The Decoy Effect

The decoy effect explains how, when faced with a decision between two options, the presence of a third, less desirable option (the decoy) might impact how we view the first two options. Decoys are “asymmetrically dominated”: they are entirely inferior to one option (the target), but just marginally inferior to the other (the competitor). For this reason, the “asymmetric dominance effect” is another name for the decoy effect.

Consider yourself in a store looking to purchase a McDonald’s McVeggie burger. You can choose between two possibilities. The one that costs less, at Rs. 145, advertises the McVeggie burger. The McVeggie Burger, Fries, and Softdrink costs Rs. 279 and is the more expensive option.

Your decision will be based on an evaluation of their respective financial value. Though it is not immediately clear, the more expensive choice offers superior value. The price increase is around 92%. But what do they actually cost?

Now think about the two in relation to a third choice.

For Rs. 220, you may have a McVeggie burger with Fries. It allows you to draw what seems to be a more thoughtful comparison. Only Fries are available for Rs. 75 more than the more affordable alternative. However, if you spend just Rs 59 more, you also get a Softdrink. Bargain!

The decoy effect – The marketing psychology just happened to you.

When customers are presented with a third option—the “decoy”—that is “asymmetrically dominant,” a phenomenon known as the “decoy effect” occurs. This phenomenon causes consumers to switch their preferences between two options. The “attraction effect” or “asymmetric dominance effect” are other names for it.