Decoy Effect

02What People Think

"I compared all three. The large is obviously the best deal."

03What’s Underneath

Suppose a menu offers 250 ml for $4 and 500 ml for $8. You prefer to spend $4. Now add 400 ml for $8. If more drink is useful to you, the large clearly beats this new medium: same price, more drink. The medium does not similarly lose to the small, which costs less but contains less.

The new option can make the large easier to justify even though neither original offer improved. This is the decoy effect: an inferior alternative changes the comparison in favor of the option that dominates it. The decoy need not attract many buyers to affect the choice between the others.

Three prices alone do not prove a decoy effect. Size, convenience, features and actual preferences all count, and studies do not find the same response in every situation. A smaller drink may genuinely suit you better. The telltale question is whether an option you never wanted has changed what you think of the options you did want.

04The Game

Remove the least attractive offer and compare the remaining choices against your original need and spending limit. Does the extra quantity still earn its extra cost, or has the menu merely supplied a flattering comparison?