How much we choose to spend or not spend on an item is one of the most important factors in the marketing mix. There’s a particularly cunning pricing strategy that marketers use to get you to switch your choice from one option to a more expensive one.
The decoy effect is one of the best known human biases violating rational choice theory. According to a large body of literature, we have a tendency to experience a specific change in preference between two options when also presented with a third option that is asymmetrically dominated (or the decoy) that, rationally, should have no influence on the decision-making process ...but it does.
In hisTED Talk, behavioral economist Dan Ariely explains the "decoy effect" using an old Economist advertisement as an example. Assymetric dominance or the decoy effect is similar to the anchor effect. It’s the phenomenon whereby consumers will tend to have a specific change in preference between two options when also presented with a third option that isasymmetrically dominant.