Decoy Effect
A phenomenon where adding a third, inferior option changes preferences between the original two options.
The decoy effect (also called asymmetric dominance) is one of the most powerful pricing tactics in behavioral economics. By adding a strategically designed third option that nobody would choose, you can systematically shift preference toward your target option.
The Classic Example
The Economist's famous pricing experiment: When offered Digital ($59) and Print+Digital ($125), most chose Digital. But when a "decoy" Print-only option was added at $125 (same price as Print+Digital), most switched to Print+Digital — because the decoy made it look like a clear winner.
How the Decoy Works in Pricing
The decoy must be asymmetrically dominated — worse than one option on all dimensions, but only worse than the other option on some dimensions. This makes the "target" option look like the obvious rational choice.
In SaaS pricing, this often looks like a middle tier that's priced close to the premium tier but with significantly fewer features, making the premium tier look like better value by comparison.
Testing Decoy Strategies
The decoy effect is one of the few behavioral principles where the mechanism is the test. You're not testing whether users prefer Plan A or Plan B — you're testing whether adding Plan C changes the A/B distribution.
Key: the decoy must be plausible enough that users consider it, but clearly inferior enough that it shifts comparison. If the decoy is obviously fake, it creates distrust.