A decade ago, behavioral economist Dan Ariely noticed something strange about the subscription option of the international weekly magazine, The Economist.
The options were:
1. Web-only subscription - $59.
2. Print-only subscription - $125.
3. Web + print subscription - $125.
The options were:
1. Web-only subscription - $59.
2. Print-only subscription - $125.
3. Web + print subscription - $125.
Dan thought what you’re thinking right now - "why would anyone buy the print-only subscription?"
On conducting a #study among MIT students, he found out that 84% chose the web and print option while only 16% of the students chose the web-only option.
On conducting a #study among MIT students, he found out that 84% chose the web and print option while only 16% of the students chose the web-only option.
No one chose the print-only option.
But interestingly, once he got rid of the second option, preferences shifted dramatically to 68% of students preferring the web-only option and only 32% preferring the web and print option.
Why did this happen?
But interestingly, once he got rid of the second option, preferences shifted dramatically to 68% of students preferring the web-only option and only 32% preferring the web and print option.
Why did this happen?
Due to the decoy effect, a #cognitive bias in which people’s preferences are influenced by inferior “decoy” options.
When we are choosing between two options, the addition of a third, less attractive decoy option can influence our approach towards the other choices.
When we are choosing between two options, the addition of a third, less attractive decoy option can influence our approach towards the other choices.
The decoy is not intended to sell, it simply nudges you towards the “target” – the more expensive or profitable option.
Consider the example of something closer to home: popcorn in multiplexes.
While a small cheese popcorn costs Rs. 150, a large one costs Rs. 300 and a tub costs Rs. 340. Obviously, you might just pay an extra 40 bucks and get the tub size popcorn, won’t you?
While a small cheese popcorn costs Rs. 150, a large one costs Rs. 300 and a tub costs Rs. 340. Obviously, you might just pay an extra 40 bucks and get the tub size popcorn, won’t you?
The decoy effect encourages you to go for the expensive option.
Brilliant, eh?
Brilliant, eh?
Sources:
“The decoy effect: how you are influenced to choose without really knowing it” - TheConversation
“Decoy Effect - Biases & Heuristics” - TheDecisionLab
“The importance of irrelevant alternatives” -The Economist
******
Visit @joinditto for simplified insurance advice
“The decoy effect: how you are influenced to choose without really knowing it” - TheConversation
“Decoy Effect - Biases & Heuristics” - TheDecisionLab
“The importance of irrelevant alternatives” -The Economist
******
Visit @joinditto for simplified insurance advice
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