6. Decoys, Phantoms and Compromises

Question 1

Decoy-Effect or Attraction-Effect:

Answer 1

The relative preference for a target product over a competitor can be increased by providing a third alternative (a decoy) that is clearly inferior to the target but is not necessarily inferior to the competitor.

Depends on:

• positioning of the decoy

• perceptual representation of the alternatives
• typically stronger effects when options can be described on a numerical scale

Question 2

Theoretical Background: Context Effects:

Answer 2

Rational Choice Theory: Fixed Preferences


• A consumer is a rational decision maker with well-defined preferences
• A consumer will always select the option which maximizes the value
• This process is independent of other options

Information Processing Approach: Preferences are constructed

• Preferences are often built and adapted just when a consumer needs to decide.
• Thereby one of a variety of decision strategies is used or combined to build preferences and to make a choice

Question 3

Theoretical Explanation: Decoy Effect:

Answer 3

The Justification Explanation

• People select alternative that is easiest to justify to others and themselves
• When an asymmetrically inferior alternative is added to a choice set, the 
asymmetrically dominating alternative becomes easier to justify

Minimizing cognitive effort

• “Cost-of-thinking-model”: the hypothesized cost of making decisions between
• dominated pairs is much less than between non-dominated pairs“

Resource Depletion

• Limited resources for self-control available which diminish in time
• Consumer rely on more intuitive decision-making

Question 4

Phantom Option:

Answer 4

An option that looks like a real choice alternative but is not available at the time when the choice is made.

• The non-available option dominates one option in the choice set.

Examples from marketing practice:

• Especially online retailing and tourism industry 

• New product versions/improvements (pre-announcements that are not available)

The effect depends on:

• how the decision situation is perceived
• the attributes of the phantom option

• the way the experiment is conducted

Question 5

Compromise:

Answer 5

Compromise Option:

An option that lies between two alternatives with respect to its attractiveness

Compromise Effect:

An option will gain choice share when it becomes a compromise or middle option in a choice set

Question 6

Theoretical Explanation: Compromise Effect:

Answer 6

Extremeness Aversion:

• the principle of loss aversion can be used to explain the extremeness aversion hypothesis
• Loss aversion: losses weigh heavier in people’s perception than a similar gain.

Similarly, disadvantages weigh heavier in people’s perception than advantages.

• Therefore, extreme characteristics in a choice set will be perceived relatively less appealing than options with moderate characteristics

Justification (see above)

Resource Depletion (see above)