How Sellers Manipulate You With Decoy Pricing

Sometimes numbers lie. Assuming you have no innate preference towards either of the two colors, it might be hard to choose between a red Civic and a blue Civic. If instead you have a choice between a red Civic, a blue Civic, and a red Civic without air conditioning, the choice becomes much easier. Dan Ariely in his book Predictably Irrational says his research shows that most people would choose the red Civic with air conditioning over both the other cars. Details inside.

Regarding the graphic above, Ariely writes:

Option (A) is better on attribute 1–let’s say quality. Option (B) is better on attribute 2–let’s say beauty. Obviously these are two very different options and the choice between them is not simple. Now consider what happens if add another option, called (-A). This option is clearly worse than option (A), but it is also very similar to it, making the comparison between them easy, and suggesting that (A) is not only better than (-A) but also better than (B).

It’s called decoy pricing, and stores use it all the time to get you to buy what they really what you to buy.

For instance, as another example in the book shows,

An ad for an Economist subscription gave 3 options

1) Print-only for $59
2) Web subscription only access for $125
3) Print and web access for $125

Obviously 3 looks like the best deal. In an experiment Dan ran with this setup, 16 subjects chose option 1, zero chose option 2, and 84 chose option 3.

What if we remove option 2 and have people choose between print-only and print and web access, all at the same rates? The results should be the same, right, after all, it’s the same deal. Instead, the results changed dramatically. 68 chose print-only and 32 chose print and web access. It was only by option 3’s relation to option 2 that made option 3 look so good. The subscription marketers at the Economist knew this and used it to boost their sales.

Can you recall any instances of decoy pricing you’ve seen?

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