Decoy effect and decision architecture

How an irrelevant third option modifies the preference between two options.

The decoy effect, also known as asymmetric dominance, is a cognitive bias that demonstrates how the introduction of a third, seemingly less desirable option can drastically alter the decision between two original choices.

Humans rarely make decisions in absolute terms; our brains are wired to eva luate value through relative comparisons.

When faced with two competing products-say, an inexpensive "Basic" and an expensive "Pro" software plan-the choice can be difficult.

However, if we introduce a third plan, the "Lure," which is similar in price to the "Pro" but with far fewer features, the "Pro" option suddenly shines as a superior offering.

The lure is not there to be sold, but to change the context of the comparison and push the consumer toward the most profitable option for the company.

Manipulation of value perception through asymmetric comparisons.

This phenomenon works because the brain avoids comparing things that are difficult to eva luate, preferring those that are easily comparable.

By adding an option that is clearly inferior to one of the main options (the target) but similar in price, we create an asymmetric comparison.

For example, imagine a travel agency offering a tour to Rome with breakfast included and another to Paris with breakfast included. The decision is difficult.

If the agency adds a third option: Rome without breakfast at the same price as Rome with breakfast, the Rome with breakfast option becomes overwhelmingly attractive, surpassing even the Paris option.

The lure makes the benefit of the target option obvious and tangible, eliminating doubt and accelerating the closing of the sale.

Application in pricing structures and packages

In commercial practice, this decision architecture is frequently used to increase the average ticket.

A common application is in the sale of electronic devices or beverages.

If a store offers a 64GB phone for £600 and a 256GB phone for £900, the price difference may deter the purchase of the expensive model.

But if they introduce a 128GB model for €850 (the lure), the 256GB model looks like a bargain for only €50 more.

Similarly, in foodservice, putting an overpriced dish or bottle of wine on the menu (that no one buys) serves as a lure to make mid-to-high priced dishes seem reasonable and affordable by comparison, preventing the customer from choosing the cheaper option by default.

Summary

The decoy effect introduces a third, less desirable irrelevant option. This alternative alters the preference between two original options, making one seem immediately superior.

The brain avoids complex absolute comparisons, preferring easy relative ones. Adding an inferior option with a similar price to the target makes the target seem like an irresistible bargain.

Marketing uses this to increase the average ticket. Placing an expensive lure makes intermediate options seem reasonable, pushing the customer toward profitability.