Trying to Understand The Decoy Effect[/b]
Decoy effect is a popular term used in marketing. According to this theory, the consumers generally seem to have a particular preference change between two options when the consumer is exposed to an asymmetrically dominated option. Hence, the decoy effect is also known as the asymmetric dominance effect. An option is believed to be asymmetrically dominated, if it is inferior to one option in all respects but is inferior in some and superior in some respects to the other option. In other words it can be said that the option is asymmetrically dominated if it is entirely dominated by one option while just partially dominated by another option.
In other words it can also be added that the decoy effect reflects the general tendency of people to change their preference of choice between two options in the cases when an extra similar option, often known as asymmetrically dominated option, is introduced. Following this theory of human tendency, the consumer's choice for the purchase of a particular product can be directed by adding more expensive decoy service or product in the market
In complicated terms it means
In marketing, the decoy 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 prefer ability, it is completely dominated by 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.
The best example given to explain the decoy effect is as follows:
Here's another example of the decoy effect. Suppose you are planning a honeymoon in Europe. You've already decided to go to one of the major romantic cities and have narrowed your choices to Rome and Paris, your two favorites. The travel agent presents you with the vacation packages for each city, which includes airfare, hotel accommodations, sightseeing tours, and a free breakfast every morning. Which would you select?
For most people, the decision between a week in Rome and a week in Paris is not effortless. Rome has the Coliseum; Paris, the Louvre: Both have a romantic ambience, fabulous food, and fashionable shopping. It's not an easy call. But suppose you were offered a third option: Rome without the free breakfast, called -Rome or the decoy.
If you were to consider these three options (Paris, Rome,-Rome), you would immediately recognize that whereas Rome with the free breakfast is about as appealing as Paris with the free breakfast, the inferior option, which is Rome without the free breakfast, is a step down. The comparison between the clearly inferior option (-Rome) makes Rome with the free breakfast seem even better. In fact, -Rome makes Rome with the free breakfast look so good that you judge it to be even better than the difficult-to-compare option, Paris with the free breakfast.”
Decoy effect is a popular term used in marketing. According to this theory, the consumers generally seem to have a particular preference change between two options when the consumer is exposed to an asymmetrically dominated option. Hence, the decoy effect is also known as the asymmetric dominance effect. An option is believed to be asymmetrically dominated, if it is inferior to one option in all respects but is inferior in some and superior in some respects to the other option. In other words it can be said that the option is asymmetrically dominated if it is entirely dominated by one option while just partially dominated by another option.
In other words it can also be added that the decoy effect reflects the general tendency of people to change their preference of choice between two options in the cases when an extra similar option, often known as asymmetrically dominated option, is introduced. Following this theory of human tendency, the consumer's choice for the purchase of a particular product can be directed by adding more expensive decoy service or product in the market
In complicated terms it means
In marketing, the decoy 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 prefer ability, it is completely dominated by 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.
The best example given to explain the decoy effect is as follows:
Here's another example of the decoy effect. Suppose you are planning a honeymoon in Europe. You've already decided to go to one of the major romantic cities and have narrowed your choices to Rome and Paris, your two favorites. The travel agent presents you with the vacation packages for each city, which includes airfare, hotel accommodations, sightseeing tours, and a free breakfast every morning. Which would you select?
For most people, the decision between a week in Rome and a week in Paris is not effortless. Rome has the Coliseum; Paris, the Louvre: Both have a romantic ambience, fabulous food, and fashionable shopping. It's not an easy call. But suppose you were offered a third option: Rome without the free breakfast, called -Rome or the decoy.
If you were to consider these three options (Paris, Rome,-Rome), you would immediately recognize that whereas Rome with the free breakfast is about as appealing as Paris with the free breakfast, the inferior option, which is Rome without the free breakfast, is a step down. The comparison between the clearly inferior option (-Rome) makes Rome with the free breakfast seem even better. In fact, -Rome makes Rome with the free breakfast look so good that you judge it to be even better than the difficult-to-compare option, Paris with the free breakfast.”