Decoy effect definition

The decoy effect is a psychological phenomenon in which the presence of a third option (the "decoy") influences people's choices between two options. The decoy is designed to be inferior to one of the options, but superior to the other option. This creates a comparison that makes the inferior option more appealing than it would be otherwise.

For example, imagine that a customer is considering purchasing two different products: Product A, which costs $100, and Product B, which costs $80. Now imagine that a third option, Product C, is introduced. Product C is similar to Product A, but costs $120. Because Product C is more expensive than Product A, it makes Product A appear more appealing and provides a favorable comparison for Product A. As a result, the customer may be more likely to choose Product A over Product B.

The decoy effect can be used by businesses to influence customer behavior and drive sales. By introducing a decoy option, businesses can make one option appear more attractive than it would be otherwise, and can ultimately drive more sales of that option. However, it is important for businesses to use the decoy effect ethically and transparently, in order to avoid misleading or manipulating customers.

The decoy effect works by leveraging people's tendency to compare options and make decisions based on relative value. When faced with multiple options, people often compare the options and choose the one that they perceive as the best value. The decoy option is designed to influence this comparison, and to make one option appear more appealing than it would be otherwise. By introducing a decoy option, businesses can influence customer behavior and drive sales.

Companies can achieve several things by using the decoy effect:

Overall, the decoy effect can be a powerful tool for companies, and can help them achieve a range of goals and objectives.