Choices often occur relative to what is on offer rather than based on absolute preferences. The decoy effect is technically known as an ‘asymmetrically dominated choice’ and occurs when people’s preference for one option over another changes as a result of adding a third (similar but less attractive) option.  For example, people are more likely to choose an elegant pen over $6 in cash if there is a third option in the form of a less elegant pen (Bateman, Munro, & Poe, 2008).

 

Bateman, I. J., Munro, A., & Poe, G. L. (2008). Decoy effects in choice experiments and contingent valuation: Asymmetric dominance. Land Economics, 84(1), 115-127.

 

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