While the regularity principle assumes that consumers are rational decision-makers, an ideal commonly debunked by behavioral scientists, there are other cognitive biases that find conflicting results to asymmetrically dominated choice. Tversky’s similarity hypothesis is one of them. Another is choice overload bias.
The choice overload bias claims that people have a harder time choosing when there are too many options available, because they feel overwhelmed. Having more options means we’re more likely to find something we like; but too many options can be too much for our brain to handle. Yet, asymmetrically dominated choice suggests that adding an extra choice makes it easier to decide. It suggests we make comparisons between the decoy, the target and the competitor and conclude that the target is evidently superior to the decoy; and that we quickly and confidently make that decision.
Since the choice overload bias suggests more choice negatively impacts decision-making, the fact that adding a decoy pushes people towards a target might have more to do with our inclination towards a good deal. It might depend on exactly what the optimum number of choices is, which is hard to pinpoint. Adding a decoy as a third option might not cause the choice overload bias, but adding it as a fifth or sixth option could. The anchoring effect suggests that if we perceive an option to be a great deal, we are more likely to choose it. But, another option isn’t necessary – sales and discounts also create the same perceptions.
Another bias that pushes us in the opposite direction of the decoy effect is the less-is-better effect. When we have multiple options, we can compare them to one another because we use alternatives as reference points. In an asymmetrically dominated choice, the decoy pushes people towards the target. But, when we only have one option available to us, we have to take it, so it seems better to us by default. The less-is-better effect describes the fact that we tend to overestimate the value of choices presented alone, rather than when there are multiple choices (including a decoy) available.
Optimal Value of the Decoy
The practicality of asymmetrically dominated choice has been questioned by many, since the decoy effect sometimes is not found in real-life scenarios, despite its prominence in psychological studies. Wanting to restore the practical application of the phenomenon, data scientist Maurits Kaptein and his colleagues conducted a study with a more realistic value comparison of the decoy option.6
Kaptein et al believed that what mattered when it came to asymmetrically dominated choice was how valuable the decoy was relative to the target and the competitor. If the decoy is too similar to the target, the two products will seem almost identical and the decoy will have no effect on choice. Similarly, if the decoy is superior to the target, people will choose it instead. To help understand how relative value matters, we can examine the first range of products Kaptein et al. asked participants to make choices from.6
The team’s first experiment asked participants to make choices between different laptops. The target was a laptop with a better battery but less memory than the competitor. When the decoy laptop was of almost the same quality as the competitor, individuals chose between the competitor and the decoy – not the target. When the decoy was of almost the same quality as the target, individuals chose between the decoy and the target – not the competitor.
Kaptein et al. then showed participants four additional decoy tasks alongside the laptop decoy task, where there were different preferable features in the competitor and the target options. These tasks included a hotel room scenario (choosing between walking distance and price), a magazine subscription scenario (choosing between delivery format and price), and a six-pack of beer/frozen orange juice scenario (choosing from quality rating and price).6
The results of the experiment showed that how valuable the decoy was relative to the competitor and the target mattered a great deal – it had to be similar to the target, but have an obviously worse component. It also had to have an obvious better appeal to the competitor. Kaptein et al. concluded that the reason the decoy effect had not been replicated in multiple previous studies was because the relative value of the decoy was not optimal.6
They also speculated that asymmetrically dominated choice was a particularly useful tool for online sales. In online sales, companies don’t need to actually produce a decoy product. Instead, they can just provide a hypothetical decoy, and provide information surrounding its quality rating and price. This no-cost tactic could help digital companies push more consumers towards their target products.6 However, using fake information to increase sales seems ethically questionable, at the very least.