The Decoy Option

Adapted from Predictably Irrational by Dan Ariely.

After years of wanting to go to both, you have been presented the option of either taking a city break in Rome or one in Paris for the first time in your life. Both have a romantic ambience, culture, history, art, fabulous restaurants, and great shopping. The options are very comparable: stay in a nice hotel with breakfast each morning.

So, assuming there were no other overriding factors in your decision, how would you chose which one to go to? Probably not an easy call.

Well, what if another option was thrown in. This option is a decoy. It is comparable in every way but it does not include the option of breakfast on the Rome trip.

Suddenly it appears that the option of taking breakfast on the Rome trip is a lot more special. If it is possible to directly compare Rome without breakfast to Paris with breakfast; Rome with breakfast seems like a very attractive option.

Using techniques like this is common by salesmen. It is used by websites to create pricing options. How offers in supermarkets are made.

The concept behind this is that, people struggle to know the value of something, but they are good at seeing the comparative advantage of one offer over another. When using decoys, you can artificially weight particular options more heavily than others. The author gave many examples of this and the evidence is very strong.