The “Decoy” Pricing Model

According to Wikipedia, the “decoy effect” (also known as the “asymmetric dominance effect”) is the phenomenon  whereby consumers change their preference between two options when also presented with a third option that is asymmetrically dominated.”

In plainer language, here’s the way decoys are utilized daily during consumer experiences.

Scenario 1: You order a medium-size Pepsi at the movies for $2.75 and the person behind the counter asks, “Would you like a large for just 25 cents more?” You say, “Yes”… that’s the decoy effect.

Scenario 2: You’re sitting at the bar in an airport terminal waiting for your plane to board. As soon as you order your $7 cocktail, the bartender smiles and says, “Want a double-shot for just $2 more?” You say, “Yes”… that’s the decoy effect.

I have no idea what your consumer response would be in similar circumstances, but I do know from my own experience (more…)