Impacts of Visualizations on Decoy Effects

The decoy effect is a well-known, intriguing decision-making bias that is often exploited by marketing practitioners to steer consumers towards a desired purchase outcome. It demonstrates that an inclusion of an alternative in the choice set can alter one’s preference among the other choices. Although this decoy effect has been universally observed in the real world and also studied by many economists and psychologists, little is known about how to mitigate the decoy effect and help consumers make informed decisions. In this study, we conducted two experiments: a quantitative experiment with crowdsourcing and a qualitative interview study—first, the crowdsourcing experiment to see if visual interfaces can help alleviate this cognitive bias. Four types of visualizations, one-sided bar chart, two-sided bar charts, scatterplots, and parallel-coordinate plots, were evaluated with four different types of scenarios. The results demonstrated that the two types of bar charts were effective in decreasing the decoy effect. Second, we conducted a semi-structured interview to gain a deeper understanding of the decision-making strategies while making a choice. We believe that the results have an implication on showing how visualizations can have an impact on the decision-making process in our everyday life.

Competition for Context-Sensitive Consumers

When preferences are sensitive to context, firms may influence purchase decisions by designing the environment of consumption choices. This paper studies how competitive retailers optimally design their product line if preferences at the store depend on whether the choice set draws consumer attention to the quality or price of a product. Before making a purchase decision, a consumer chooses among retailers without (fully) anticipating that her preferences at the store are malleable. We show that this setup can align evidence on retailer marketing practices and the existence of loss leaders with the experimental literature on decoy effects: in equilibrium, retailers use loss leaders to attract the consumer to the store and decoy products to draw consumer attention at the store to more profitable alternatives featuring a higher price (inducing a profitable upsell) or lower production cost (inducing a profitable downsell). We embed and compare the predictions of three recent specifications of choice-set dependent attention—namely, Salience, Focusing, and Relative Thinking. All three specifications predict that firms construct choice environments that utilize decoy effects to up- or downsell the consumer. Because they differ in how attention can be directed using the product line, however, they differ in their predictions of how the decoy will be positioned in the price-quality space. This paper was accepted by Yan Chen, decision analysis.

Research on the Complexity Mechanism of Decoy Strategies Based on Multiagent Simulation

Competition and diffusion of products are of great significance to companies. In this study, various true decoy strategies are constructed using different combinations of price and quality. This paper then analyzes the performance of strategies using different product competition and diffusion scenarios. The influences of neighbor nodes, reconnection probability, and herd mentality on decoy effects are explored. The results show that setting an appropriate true decoy can enhance the competitiveness of a target product to some extent. Conversely, an inappropriate decoy strategy will play a negative role, encroaching on market share. In terms of effects, changes in neighbor nodes, reconnection probability, and herd mentality will not influence the direction of the evolution of a product for the same true decoy strategies. However, the speed of evolution will be affected. These findings provide a theoretical basis for enterprises taking action to enhance product competitiveness in the market.

A map of decoy influence in human multialternative choice

Human decisions can be biased by irrelevant information. For example, choices between two preferred alternatives can be swayed by a third option that is inferior or unavailable. Previous work has identified three classic biases, known as the attraction, similarity, and compromise effects, which arise during choices between economic alternatives defined by two attributes. However, the reliability, interrelationship, and computational origin of these three biases have been controversial. Here, a large cohort of human participants made incentive-compatible choices among assets that varied in price and quality. Instead of focusing on the three classic effects, we sampled decoy stimuli exhaustively across bidimensional multiattribute space and constructed a full map of decoy influence on choices between two otherwise preferred target items. Our analysis reveals that the decoy influence map is highly structured even beyond the three classic biases. We identify a very simple model that can fully reproduce the decoy influence map and capture its variability in individual participants. This model reveals that the three decoy effects are not distinct phenomena but are all special cases of a more general principle, by which attribute values are repulsed away from the context provided by rival options. The model helps us understand why the biases are typically correlated across participants and allows us to validate a prediction about their interrelationship. This work helps to clarify the origin of three of the most widely studied biases in human decision-making.