Decoy Effect (Why do we change our preference when presented with a third option?)
The Decoy Effect, a brief explanation
What is the Decoy Effect?
The decoy effect is the tendency to change preference for two options when presented with a third option.
Example
Imagine you are using your tablet when you notice that one of your subscriptions is due to end soon. The company behind the subscription emails you asking if you would like to roll over the subscription or select another subscription option. When presented with two options for consideration Option 1 is £400 and Option 2 is £300. After a few minutes of considering the options you notice a third option, Option 3 at £450. Option 3, the decoy makes the earlier options seem much better value.
The literature
Slaughter, J. E., Kausel, E. E., Quiñones, M. A. (2011). The decoy effect as a covert influence tactic. Behavioral Decision Making, 24(3), 249-266. Doi: 10.1002/bdm.687
Zhang, T. & Zhang, D. (2007). Agent-based simulation of consumer purchase decision-making and the decoy effect. Journal of Business Research, 60(8), 912-922. Doi: 10.1016/j.busres.2007.02.006
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