Joshua Franklin Wiedeman

Decoy Effect

The decoy effect (also called asymmetric dominance) happens when adding a third, weaker option makes one of the original options look better. For example, if a medium popcorn costs $6.50 and a large costs $7.00, the medium looks like a poor deal and the large looks like a bargain. The medium is the decoy; the large is the target.

How it works

People compare options to each other rather than judging them on their own. When two options are hard to compare, a third option that is clearly worse than one of them creates an easy comparison, and people pick the option that wins it. In Dan Ariely’s well-known test of The Economist’s pricing, offers were web-only for $59, print-only for $125, and print plus web for $125. Almost nobody chose print-only, but its presence pushed most people to print plus web.

How to do it

  1. Pick the target option you want most buyers to choose, usually your highest-margin tier.
  2. Design a decoy that is priced close to the target but clearly worse on at least one feature.
  3. Show all three options side by side, with the decoy next to the target.
  4. Measure plan selection with and without the decoy.
  5. Adjust the decoy’s price and features until the target gets the share you want.

What to measure

  • Target option selection rate: the percentage of buyers choosing the target, with and without the decoy.
  • Average revenue per customer: total revenue divided by number of customers, before and after adding the decoy.
  • Pricing page bounce rate: watch for increases that suggest the decoy is confusing people.

Best practices

  • Make the decoy clearly worse, but not absurd. A joke option makes buyers feel manipulated.
  • Aim for buyers to feel smart choosing the target, not tricked.
  • Use the same idea outside pricing: content offers, product configurations, and upgrade prompts.

Common pitfalls

  • Building a decoy that some buyers actually want, which pulls sales away from the target.
  • Adding so many options that the decoy creates confusion. Three options is usually enough.
  • Using a decoy when the core offer is unclear. A decoy shapes the choice only for people already ready to buy.