You're standing in line at the movies, staring at the popcorn sizes. Small for $3, medium for $6.50, large for $7. The large suddenly seems like a no-brainer—just 50 cents more than the medium! You order it, walk away satisfied, then realize halfway through the previews that you never really wanted that much popcorn in the first place.
Welcome to the decoy effect, one of the most powerful yet invisible forces shaping your everyday decisions.
What Is the Decoy Effect?
The decoy effect happens when businesses introduce a third option specifically designed to make one of the other options look irresistible. It's also called "asymmetric dominance," though that's just academic speak for a simple trick: adding something that seems worse to make something else seem better.
Here's how it works. You need three options: the target (what the business wants you to buy), the competitor (a reasonable alternative), and the decoy (a strategically worse choice). The decoy is completely inferior to the target but only partially worse than the competitor.
Academics Joel Huber, John Payne, and Christopher Puto first described this phenomenon in 1981. They tested six scenarios—beer, cars, restaurants, lottery tickets, movies, and television sets. In every case except lottery tickets, the decoy successfully pushed people toward the target option.
What made this research groundbreaking? It challenged existing theories about how people make decisions. The prevailing wisdom said that adding a new option couldn't increase the probability of choosing one of the original options. The decoy effect proved that wrong.
The Economist's $125 Lesson
Dan Ariely, a behavioral economist, ran one of the most famous demonstrations of this effect. He presented 100 MIT students with subscription options for The Economist:
- Web-only: $59
- Print-only: $125
- Print + Web: $125
The results? A whopping 84% chose the combo option. The print-only choice seemed ridiculous—same price as the combo but with less value. It was the perfect decoy.
Then Ariely removed the middle option and presented just two choices:
- Web-only: $59
- Print + Web: $125
Now only 32% chose the expensive option, while 68% picked the cheap one. The decoy's absence completely flipped people's preferences.
This wasn't about students suddenly realizing they didn't need print. It was about losing that easy comparison that made the combo feel like a steal.
Why Our Brains Fall for It
Dan Ariely explains it simply: "Humans rarely choose things in absolute terms. We don't have an internal value meter that tells us how much things are worth. Rather, we focus on the relative advantage of one thing over another."
We're comparison machines. Our brains constantly evaluate items in relation to each other rather than asking "What is this actually worth to me?" This made evolutionary sense when we needed to quickly assess threats or opportunities. But in modern commerce, it makes us vulnerable to manipulation.
The decoy effect also taps into regret aversion. When faced with similar options, we worry about making the wrong choice. The decoy provides a clear "bad" option, which makes one of the others feel obviously "right." It gives us a rational-seeming justification for our decision, even though the process happens subconsciously.
Most people have no idea they're being influenced. They walk away thinking they made a smart choice based purely on value.
Where You'll Find Decoys
Once you know what to look for, you'll see decoy pricing everywhere.
Subscription services love this strategy. Spotify, newspapers, magazines, and business software platforms routinely structure their tiers with a middle option that makes the premium tier irresistible. Apple uses decoy pricing on product comparison pages. Beauty brands like Kiehl's offer three product sizes where the middle one makes the large seem like obvious value.
Movie theaters and fast food are classic offenders. That medium popcorn or medium soda exists primarily to make the large look reasonable. An informal National Geographic experiment found that very few people bought large popcorn when only small was available. Add a medium as a decoy, and the large became "irresistible."
Tech products use this constantly. Imagine shopping for laptops: one at $900, another at $1,400 with slightly more RAM, and a third at $1,500 with significantly better specs. That small $100 difference between the middle and top options pushes buyers toward the expensive choice. Without the middle option, the $600 jump from cheap to expensive would feel too steep.
The pattern is consistent: three options work best. More choices complicate decisions and can actually diminish the effect. The sweet spot is giving people just enough options to make comparisons feel easy.
Beyond Shopping Carts
The decoy effect extends far beyond commerce. Studies show it influences selection of political candidates, job applicants, and public policies.
Investment behavior changes with decoys too. Research found that introducing a poorly performing decoy company improved the chances investors would choose a better-performing company from the same industry. The decoy made one investment look safer by comparison.
Health applications reveal both the effect's power and its ethical complexity. Studies found that including a decoy hospital with longer travel times and wait times increased people's likelihood of choosing colorectal cancer screening. Recent research on vaccine uptake showed that presenting decoy vaccines with more severe side effects or reduced effectiveness increased both preferences for target vaccines and overall vaccine acceptance.
These examples show the effect can be used for good. But they also raise questions about manipulation versus persuasion.
The Dark Side of Decoys
The products most commonly pushed using decoys? Unhealthy foods. Soft drinks, French fries, and oversized portions get the decoy treatment constantly. This contributes to overconsumption and the chronic diseases that follow.
The decoy effect causes people to spend more than they need and buy things they don't actually want. That movie popcorn you couldn't finish. The subscription tier with features you never use. The laptop with specs beyond what you'll ever need.
Buyer's remorse follows these purchases. Once you're home and the comparison is gone, you realize you chose based on relative value rather than actual need. Most of the time, the decoy effect pushes people toward more costly alternatives that don't add much real benefit.
The financial consequences add up. Small decisions influenced by decoys—a larger coffee here, a premium subscription there—compound over time into significant money spent on marginal improvements you didn't originally want.
Protecting Yourself
Awareness is your first defense. When you see three options, pause. Ask yourself: "Would I choose this if the middle option didn't exist?"
Consider your needs in absolute terms before comparing options. What do you actually need? What would satisfy you? Establish this baseline before looking at what's available. This prevents the decoy from setting your reference point.
Watch for price clustering. If two options are very close in price but different in value, you're probably looking at a target and a decoy. The business wants you to pick the more expensive one.
Be especially wary when the middle option seems pointless. If you find yourself thinking "Why would anyone choose that?"—congratulations, you've spotted the decoy. It exists solely to manipulate your perception of the other options.
Finally, remember that "good value" is only good if you actually need it. A 50% bigger portion for 10% more money is a terrible deal if you can't finish the smaller size.
The Bigger Picture
The decoy effect reveals something uncomfortable about human decision-making. We like to think we're rational, carefully weighing our options and choosing what's best for us. The reality is messier. Our brains take shortcuts, rely on comparisons, and can be predictably manipulated.
Businesses know this. The decoy effect isn't some obscure academic curiosity—it's a standard tool in pricing strategy, used by companies from coffee shops to tech giants.
This doesn't make you stupid or weak. It makes you human. Our comparison-based thinking served us well for most of human history. But in a commercial environment designed to exploit these tendencies, awareness becomes essential.
The next time you're choosing between options and one suddenly seems obviously best, take a breath. Look at what's being offered. Ask whether you're responding to actual value or just relative comparison. Your wallet—and your genuine needs—will thank you.
That medium popcorn isn't there by accident. It's there to sell you the large. Knowing that changes everything.