Decoy Effect

Decoy effect is a popular term used in marketing. According to this theory, the consumers generally seem to have a particular preference change between two options when the consumer is exposed to an asymmetrically dominated option. Hence, the decoy effect is also known as the asymmetric dominance effect.
An option is believed to be asymmetrically dominated, if it is inferior to one option in all respects but is inferior in some and superior in some respects to the other option. In other words it can be said that the option is asymmetrically dominated if it is entirely dominated by one option while just partially dominated by another option.

In other words it can also be added that the decoy effect reflects the general tendency of people to change their preference of choice between two options in the cases when an extra similar option, often known as asymmetrically dominated option, is introduced.

Following this theory of human tendency, the consumer’s choice for the purchase of a particular product can be directed by adding more expensive decoy service or product in the market.
It has been seen that with the presence of an asymmetrically dominated option, a bigger section of consumers prefers to opt for the dominating option than the section of consumers that would have preferred the same option if the asymmetrically dominated option were not present. Hence it is said that the asymmetrically dominated option acts as a decoy that actually assists in increasing the dominating option preference. The decoy effect comes into action when the decision theory’s axiom of independence of irrelevant alternatives is violated in the practical application.

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Last Updated on : 1st July 2013

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