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Pricer’s Points: The decoy effect: Why you make irrational choices every day (without even knowing it) | Kent Hendricks

The decoy effect describes what happens when, while choosing between two items, a third item is introduced that causes you to switch your preference between the first two items.

A few weeks ago, I was at a clothing store trying to decide between two shirts. I liked the way one shirt fit, but I liked the pattern of the other one better.

The choice paralyzed me. I went back and forth between the two shirts, holding them up side-by-side, taking one to the cashier, then the other. The two shirts were equally good, and I was struggling to choose.

Then I noticed a third shirt. It was similar to the first shirt—the one that fit really well. But it was also twice as expensive.

I re-evaluated my first two options. One of them was similar to this new third option. The main difference was the price: it was half as expensive. That made it more appealing. I happily made my decision, got the shirt, and left a satisfied customer.

While I was driving home, I realized I had fallen for the decoy effect.

You encounter the decoy effect every day
But wait, you may be saying. The Economist example is so obvious. I would never fall for that.

If you’re thinking of buying an iPhone 8, then the existence of the iPhone X makes you more likely to buy the iPhone 8 Plus—even though in no case would you buy the iPhone X. Simply by adding a more expensive decoy, Apple has raised the average price paid for any iPhone from $694 to $796—not only by introducing a more expensive model, but by making the previous most expensive model the new midpoint.

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The decoy effect: Why you make irrational choices every day (without even knowing it) – Kent Hendricks.


Kent Hendricks

Kent Hendricks
Director of Marketing, Online Learning at Zondervan

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