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Behavioral eco-lect2: Decision making under certainty part 2 (Expansion…
Behavioral eco-lect2: Decision making under certainty part 2
Decoy effect/Menu dependence
Famous example of a subscription for The Economist
the introduction of an inferior product should not change your mind.
see slide 13/33
Expansion condition
Expansion condition: If you choose x from {x, y}, and if you don’t prefer z over x or y, then you must also choose x from {x, y, z}.
However, it turns out that some people do change their preferred option when given an irrelevant alternative
be irrational to change your choices when an irrelevant alternative is presented
Such an irrelevant alternative is called a
‘decoy’.
GRAPHS slide 15-16/33
Other forms of the decoy effect
Compromise effect
People’s tendency to choose an alternative that represents a compromise or middle option in the menu
For example: Coca cola 1.5 liter (instead of 2 liter or 1 liter)
Extremeness aversion
A tendency to avoid options at the extremes of the relevant dimension
For example: on a Likert scale, people choose to avoid the highest and lowest answer (‘very much agree’, or ‘very much disagree’).
Not always decoy
Restaurant, you choose between salad and smoothie
waiter forgot to mention daily special: cocaine
In this case, choosing to switch plans (leave immediately) is not because the third alternative (cocaine) makes other features of the salad and smoothie more or less desirable.
Offering cocaine tells something about the quality of the restaurant
.