The Decoy Effect: How does the option of the medium popcorn tempt you into buying the large one?
Let’s consider a situation: You go to the movies and you are lining up to buy some popcorn. You can buy a small popcorn for 3€ or a large one for 5€. On the one hand, you want a decent amount of popcorn but on the other hand, 5€ is way too much to spend. Now, consider these two options in light of a third one. In this case, you can get a small popcorn for 3€, a medium-sized for 4.5€, or a large one for 5€. The medium size will better suit your appetite compared to the small one; but if you spend just 0.5€ extra, you can get the large bucket which contains nearly double the amount of popcorn. After all, doesn’t the large popcorn look like a good deal? If you think so, you have just experienced the so-called “decoy effect”.
In order to better understand how the decoy effect works, we first need to explore the concept of “asymmetric dominance”. In a common decoy example, there are three options available. The target, which is the most expensive option that businesses typically want us to choose, the competitor, which is the cheaper option competing with the target and then the decoy, or otherwise put the “asymmetrically dominated” option. Plainly put, “asymmetrically dominated” means that the decoy is inferior in all aspects to the target (for example smaller quantity at almost the same price), but partially superior to the competitor (larger quantity but for a higher price). Therefore, by introducing a decoy, marketers shift the frame of attention from the target and the competitor, leading us to unconsciously evaluate the target by comparing it to the decoy instead of the competitor. Within this new frame, the obvious unattractiveness of the decoy serves in emphasizing the superiority of the target, nudging us towards it.
The decoy effect is a cognitive bias that influences our decision making in ways we often don’t realize. For instance, behavioral scientists argue that the decoy effect can influence our Tinder swipes: it is proven to be more likely for us to “swipe right” on someone right after being exposed to a similar-looking, but slightly less attractive person. In this case, the unattractive person serves unconsciously as a decoy by creating a favorable frame of comparison for the following potential match. Moreover, it is widely said that when there are two front-runners in a political race, the way that the undecided voters perceive a third decoy-candidate can influence the attractiveness of the others. In fact, research demonstrates that the decoy effect played an important role in the 2000 US presidential election in which George W. Bush competed with Al Gore. In this election, the presence of Ralph Nader, a third independent competitor, instead of taking votes away from Al Gore, as commonly believed, increased his attractiveness — as Al Gore was the candidate that Nader resembled more closely but couldn’t outrun.
Why does it happen?
It is simple. We hate to make the wrong choice. Therefore, when we are about to make a decision — even a straightforward, low-involvement one — the more thoroughly we rationalize one of the available options, the more likely it is that we will favor it. That’s what decoys do for us; they provide us with a readily-made and easily-discoverable justification for choosing the target, leading us to make a decision based less on which option best suits our needs and more on which feels like the most advantageous choice. In other words, decoys make the target look like an easily justifiable and, therefore, a safer and less overwhelming option. Besides, although in any given situation, there are numerous factors that people can examine in order to make the right decision, they typically pick only a small number of factors to focus on, because by doing so, it’s easier for them to handle their reasoning process. Decoys capitalize on this tendency. For instance, revising the popcorn scenario, when we were introduced to a medium-size option, it was quite simpler to compare the large portion with the medium instead of the small one, as in that case the price factor was almost stable and only the quantity factor was altered.
How much can decoys affect me?
To realize the extent to which the decoy effect can influence our decision making, think of the following experiment conducted by the psychologist and behavioral economist, Dan Ariely. In the late 2000s, Ariely noticed something strange in the way that the Economist journal was pricing its subscription options. The three options were: (i) a web-only subscription for $59, (ii) a print-only subscription for $125 and (iii) a web and print subscription for $125. Ariely wondered: Why would really anyone pick the second option? So Ariely presented these options to his students and asked them to pick the one that they would prefer to purchase: 16% of them chose the cheaper web-only subscription, 84% chose the more pricey web and print subscription, and, as expected, none of them chose the print-only subscription. Next, Ariely got rid of the option that no one chose and invited another group of students to pick one of the remaining two. This time, 68% of the students, chose the cheap web-only subscription and only 32% picked the expensive web and print subscription. Apparently, as Ariely demonstrated, by including a decoy, the Economist shifted consumer’s preference towards the more pricey subscription by about 43%, leading them to pay almost $70 more for a service that they didn’t need!
Coming to an end, it would be useful to keep in mind that the list of the brands who play this decoy trick is quite longer than one would expect, including key players such as Starbucks, Apple, Coca Cola and Netflix. So, next time you are about to buy the double-sized “venti” beverage instead of the “grande” one on Starbucks — as it will only cost some extra cents -, or you are considering to purchase a “premium” rather than a “standard” plan on Netflix — as it seems the most “value for money” option — spare some extra time to re-evaluate if you really need that great deal you found!
