Decoy Effect


Definition: the Decoy Effect is the phenomenon whereby consumers will tend to have a specific change in preference between two options when also presented with a third option that is asymmetrically dominated. In simple terms, when deciding between two options, an unattractive third (middle) option can change the perceived preference between the other two, typically in favor of the more expensive one. It is one form of psychological pricing.


More on pricing: By-Product Pricing, Cost-based Pricing, Demarketing, Dynamic Pricing, Loss Leader, more...


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