[Dominated Alternatives - Decoy effect] When deciding between two options, an unattractive third option can change the perceived preference between the other two
Dominated Alternatives: Can introducing a third decoy option make you more likely to choose the option, I secretly want you to choose?
In marketing, this is also called the decoy effect or attraction effect or asymmetric dominance effect. A phenomenon whereby the introduction of a third option leads to a change in choice.
Dominated alternatives here quickens the choice patterns of consumers by dulling the relevance of one option by the introduction of another, thereby making one option almost invalid.
More simply, when deciding between two options, an unattractive third option can change the perceived preference between the other two.
Example (1)
Just look at any web b2b platforms, they will almost have a pricing plan split in three options
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Interpretation
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In 1986, psychologist and economist Daniel Kahneman showed that even profit-maximizing firms will have an incentive to act as a manner that is perceived as fair to their customer. People have a tendency to resist unfairness as soon a profit-maximizing agent or a firm is seeking to overly exploit some profit opportunities.
For instance, a question was put to 191 adult residents in Vancouver: When football games tickets are in great demand, which one of the allocation methods seems the most and least fair?
- By auction: the tickets are sold to the highest bidders.
- By lottery: the tickets are sold to the people whose names are drawn.
- By queue: the tickets are sold on a first-come first-served basis.
Auction came out as the least fair (75% of the respondents) and queuing being the most fair.