Decoy effect
Encyclopedia
In marketing
, the decoy effect (or asymmetric dominance effect) is the phenomenon whereby consumers will tend to have a specific change in preference between two options when also presented with a third option that is asymmetrically dominated. An option is asymmetrically dominated when it is inferior in all respects to one option; but, in comparison to the other option, it is inferior in some respects and superior in others. In other words, in terms of specific attributes determining preferability, it is completely dominated by (i.e., inferior to) one option and only partially dominated by the other. When the asymmetrically dominated option is present, a higher percentage of consumers will prefer the dominating option than when the asymmetrically dominated option is absent. The asymmetrically dominated option is therefore a decoy
serving to increase preference for the dominating option. The decoy effect is also an example of the violation of the independence of irrelevant alternatives
axiom
of decision theory
.
) and lower price as positive attributes; while some consumers may want a player that can store more songs, other consumers will want a player that costs less. In Consideration Set 1, two devices are available:
In this case, some consumers will prefer A for its greater storage capacity, while others will prefer B for its lower price.
Now suppose that a new player, C, is added to the market; it is more expensive than both A and B and has more storage than B but less than A:
The addition of C—which consumers would presumably avoid, given that a lower price can be paid for a model with more storage—causes A, the dominating option, to be chosen more often than if only the two choices in Consideration Set 1 existed; C affects consumer preferences by acting as a basis of comparison for A and B. Because A is better than C in both respects, while B is only partially better than C, more consumers will prefer A now than did before. C is therefore a decoy whose sole purpose is to increase sales of A.
Conversely, suppose that instead of C, a player D is introduced that has less storage than both A and B, and that is more expensive than B but not as expensive as A:
The result here is similar: consumers will not prefer D, because it is not as good as B in any respect. However, whereas C increased preference for A, D has the opposite effect, increasing preference for B.
Marketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
, the decoy effect (or asymmetric dominance effect) is the phenomenon whereby consumers will tend to have a specific change in preference between two options when also presented with a third option that is asymmetrically dominated. An option is asymmetrically dominated when it is inferior in all respects to one option; but, in comparison to the other option, it is inferior in some respects and superior in others. In other words, in terms of specific attributes determining preferability, it is completely dominated by (i.e., inferior to) one option and only partially dominated by the other. When the asymmetrically dominated option is present, a higher percentage of consumers will prefer the dominating option than when the asymmetrically dominated option is absent. The asymmetrically dominated option is therefore a decoy
Decoy
A decoy is usually a person, device or event meant as a distraction, to conceal what an individual or a group might be looking for. Decoys have been used for centuries most notably in game hunting, but also in wartime and in the committing or resolving of crimes.-Duck decoy:The term duck decoy may...
serving to increase preference for the dominating option. The decoy effect is also an example of the violation of the independence of irrelevant alternatives
Independence of irrelevant alternatives
Independence of irrelevant alternatives is an axiom of decision theory and various social sciences.The word is used in different meanings in different contexts....
axiom
Axiom
In traditional logic, an axiom or postulate is a proposition that is not proven or demonstrated but considered either to be self-evident or to define and delimit the realm of analysis. In other words, an axiom is a logical statement that is assumed to be true...
of decision theory
Decision theory
Decision theory in economics, psychology, philosophy, mathematics, and statistics is concerned with identifying the values, uncertainties and other issues relevant in a given decision, its rationality, and the resulting optimal decision...
.
Example
For example, if there is a consideration set involving MP3 players, consumers will generally see higher storage capacity (number of GBGigabyte
The gigabyte is a multiple of the unit byte for digital information storage. The prefix giga means 109 in the International System of Units , therefore 1 gigabyte is...
) and lower price as positive attributes; while some consumers may want a player that can store more songs, other consumers will want a player that costs less. In Consideration Set 1, two devices are available:
| A | B | |
|---|---|---|
| price | $400 | $300 |
| storage | 30GB | 15GB |
In this case, some consumers will prefer A for its greater storage capacity, while others will prefer B for its lower price.
Now suppose that a new player, C, is added to the market; it is more expensive than both A and B and has more storage than B but less than A:
| A | B | C | |
|---|---|---|---|
| price | $400 | $300 | $450 |
| storage | 30GB | 15GB | 25GB |
The addition of C—which consumers would presumably avoid, given that a lower price can be paid for a model with more storage—causes A, the dominating option, to be chosen more often than if only the two choices in Consideration Set 1 existed; C affects consumer preferences by acting as a basis of comparison for A and B. Because A is better than C in both respects, while B is only partially better than C, more consumers will prefer A now than did before. C is therefore a decoy whose sole purpose is to increase sales of A.
Conversely, suppose that instead of C, a player D is introduced that has less storage than both A and B, and that is more expensive than B but not as expensive as A:
| A | B | D | |
|---|---|---|---|
| price | $400 | $300 | $350 |
| storage | 30GB | 15GB | 10GB |
The result here is similar: consumers will not prefer D, because it is not as good as B in any respect. However, whereas C increased preference for A, D has the opposite effect, increasing preference for B.