How the Decoy Effect Makes Dupes of Us All
Imagine that, on the second morning of a business trip, you go to unzip your suitcase, only to realize you forgot to pack any pants. With just a few hours before a big presentation, you duck into the closest mall, for a shopping trip with a firm deadline.
You step into a promising store, and with the help of a sales clerk, you quickly narrow the pool of potential pants to just two options.
Pair A is stylish and flattering, but they’re pushing your emergency pants replacement budget at $70.
Pair B won’t turn any heads, but they fit fine, and they’re on sale for $20.
‘Is it worth it to splurge on a pair of pants I’ll only need to wear once?’ you ask yourself, frowning in the dressing room mirror. ‘The cheaper ones will get the job done, and it’s not like I don’t have nice pants at home.’
Just then, the clerk knocks on the door. “Hey,” she says, “As long as you’re trying on slacks, we just got a new shipment in, and I think we’ve got your size.” She passes you a new pair of pants over the door, and you try them on. They’re not as show-stopping as that $70 pair, but they do complement your shirt better than the $20 pants.
Then you check the price tag: $100.
Suddenly, dropping $70 for a high-quality pair of pants doesn’t seem like that big of a deal. They’re the nicest option, and not even the priciest. You quickly come to a decision.
Walking out the door five minutes later, you are $70 lighter, but you have a great new pair of pants, and that inner glow of a savvy shopper.
Congratulations: you just got played.
Psychologists call it the decoy effect. When trying to choose between options (Pair A or Pair B) by weighing several variables (in this case, price and pants quality), your perceptions can be thrown off by introducing an extra option that is inferior in all ways to one candidate, while still preferable in some ways to the other one. (There’s a term for this kind of asymmetric dominance of traits. Actually, the term is “asymmetric dominance.”)
To tilt you towards the more expensive, higher-quality pair of pants, Option C needs to be more costly than Option A, while also not quite as nice.
Conversely, a sales clerk determined to save you money (perhaps someone not on commission) might bias you towards the affordable if middle-of-the-road Option B pants by suggesting you try on a pair of $30 trousers made with cheap fabric and sloppy stitching. Now Option B, with its $20 price tag, looks like a steal.
At the end of the day, the human brain is bad at weighing multiple factors at once, and easily swayed by any available reference points—and companies know this. This isn’t a conspiracy theory; Duke University’s Joel Huber first published an experiment demonstrating the influence of those asymmetrically dominating decoys in 1982. These days, marketers actively discuss the Decoy Effect as a strategy to influence customers towards the “right” decisions.
In his book Predictably Irrational, Dan Ariely refers to this phenomenon as the “secret agent” of many decisions. It’s hard to guard against, because on some level, it looks like smart comparison shopping. Your sales clerk might not have even consciously noticed the subtle manipulations at play—after all, her job is to show you all the pants. A kind clerk might even be relieved to see that you didn’t go with that costly, inferior pair.
Still, there’s something creepy about never knowing which of your consumer decisions might be shaped in part by marketing executives in a boardroom somewhere. Perhaps the best way to get around this—assuming you’ve got the time—is to comparison shop not just between items but between stores. After all, companies have no incentive to compete against themselves, but they do want to offer better deals than their nemeses.
So the next time you need to make a purchase, don’t just consider your options carefully; consider them wisely. Maybe you can even make a game out of trying to spot the decoys…