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In marketing, the decoy effect (or attraction 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 preferences, 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.
Suppose there is a consideration set (options to choose from in a menu) that involves MP3 players. Consumers will generally see higher storage capacity (number of GB) 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, the "decoy", is added to the market; it is more expensive than both A, the "target", and B, the "competitor", and has more storage than B but less than A:
|A (target)||B (competitor)||C (decoy)|
The addition of decoy 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 (competitor)||B (target)||D (decoy)|
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.
The decoy effect is usually measured by comparing the frequency of choice of the target, A in the absence of the decoy, C, compared with when the decoy is present in the consideration set. The decoy effect can also be measured as how much more a consumer is ready to pay to choose the target rather than the competitor.
The debate on the existence and relevance of the attraction effect was recently renewed. New research points out that the attraction effect does not appear in realistic purchasing scenarios, for example when options are presented graphically, or when the target and the competitor are not exactly of the same value.
The original authors had to underline again that the attraction effect occurs only if the consumer is close to indifference between the target and the competitor, if both dimensions of the products (in our example, price and storage capacity) are about as important as each other to the consumer, if the decoy is not too undesirable, and if the dominance relation is easy to identify.