What Is The Decoy Effect In Behavioral Economics?

The decoy effect is a phenomenon in which people’s preferences between two options change depending on the presence of a third, irrelevant option. The decoy option is typically designed in such a way that it makes one of the original options appear more appealing by comparison. For example, if you were trying to decide between two vacation packages, and a third, less attractive package was introduced, you might be more likely to choose one of the original options that now looks more appealing by comparison. This effect can be used by marketers to influence consumer decision-making.

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