# Why Would Anyone Pick That?: The Asymmetric Dominance Effect

15.12.2017

Episode #7 of the course How cognitive biases are messing up your decisions by Abasi Latcham

Hey! Thanks for keeping on the path!

In this lesson, we’ll explore the asymmetric dominance effect (hereafter called the decoy effect).

What Is It?

The decoy effect is a fancy way of saying that people generally evaluate things based on relativities instead of absolutes. What does this mean? In practice, it means that if you’re trying to choose between two options, introducing a third so that one of the three options is inferior in every way except one (i.e. it is dominated asymmetrically or it’s the decoy) will magically make one of the other two options seem more attractive.

Here is a paraphrased version of the classic example referenced in Dan Ariely’s Predictably Irrational. Imagine you want to subscribe to The Economist magazine, and they offer two subscription models:

• digital only for \$59 per year

• print only for \$125 per year

Each option has its advantages. Ariely found that 68% of his students preferred the digital option, and about 32% the print option. But here’s what happened when he showed his students what The Economist was actually offering:

• digital only for \$59 per year

• print only for \$125 per year

• print and digital for \$125 per year

The introduction of the print and digital option, for the same price as the print only, changed things a lot. First, let’s make clear that the introduction of this makes the print-only option the decoy. Now, only 16% opted for the digital-only option (c.f. 68%), none for the print only (c.f. 32%), and the remaining 84% went for the combo. Basically, your brain thinks, “The combo deal is better in two ways (i.e. you get more than either individual option, plus it’s no more expensive than the print-only option), whereas each individual option is only better in one way (or not better at all). Two ‘betters’ are better than one ‘better,’ so the combo option must be the best!

Great deal for The Economist, nonsense response for the students.

Examples

Marketing is the most common domain of the decoy effect, but it’s also present elsewhere.

Price tables: These, like The Economist example above, frequently display the decoy effect.

Menus and wine lists: Putting an expensive option at the top of a menu makes the other meals seem cheaper (remember anchoring?). Similarly, wine lists make use of the decoy effect: “People often order the second cheapest wine on the list and not the cheapest because they don’t want to look too stingy. Most of the time, the second cheapest wine is the one that has the highest profit margin.”

Romance: Ariely offers some dating advice: If you are looking to meet that special someone in a social setting, he recommends bringing someone who looks similar to you but is less attractive. They will act as a decoy, making you seem more attractive by comparison. And if a “similar but better-looking friend of the same sex asks you to accompany him or her for a night out, you might wonder whether you have been invited along for your company or merely as a decoy.”

Elections: Studies show that third candidates and minor parties influence your voting preferences by acting as decoys.

Vigilance

Whenever you see three options and you think one looks so ridiculous, the seller must be stupid, think again. You are probably being exposed to asymmetric dominance. So, keep your eyes open, and evaluate each option on its absolute (not relative) merits.

Tomorrow, we’re going to talk about pain, parties, and why it’s always good to end on a high note in the context of the peak-end rule.

Recommended reading

Tracking the Decoy: Maximizing the Decoy Effect through Sequential Experimentation

How to Use the Decoy Effect to Help Buyers Choose the Right Option

Recommended video

Are We in Control of Our Own Decision?

Recommended book

Nudge: Improving Decisions about Health, Wealth, and Happiness by Richard H. Thaler and Cass R. Sunstein

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