Decoy Effect

Decoy Effect

Reviewed by Faisal Zaidi

Adding an option nobody picks can raise the chance of choosing the option that beats it. It is why a pricing page has three tiers and one of them is there to lose.

What it is

Take a choice between two products where each beats the other on something: one cheaper, one better. People split. Add a third option that is clearly worse than one of the first two and not clearly worse than the other. That third option is asymmetrically dominated.

Nobody picks it, and its presence increases the probability of choosing the option that dominates it. Standard choice models say adding an option can only take share away. Here, adding a loser gives share to a specific winner.