Tracking the Decoy: Maximizing the Decoy Effect Through Sequential Experimentation

9 Pages Posted: 17 Nov 2016

See all articles by Maurits C. Kaptein

Maurits C. Kaptein

Tilburg University - Department of Methodology and Statistics

Robin Emden

Leiden University

Davide Iannuzzi

VU University Amsterdam - Faculty of Sciences

Date Written: November 2016

Abstract

The decoy effect is one of the best known human biases violating rational choice theory. According to a large body of literature, people may be persuaded to switch from one offer to another by the presence of a third option (the decoy) that, rationally, should have no influence on the decision-making process. For example, when asked to choose between a laptop with a good battery but a poor memory and a laptop with a poor battery but a good memory, customers may be induced to shift their preference if the offer is accompanied by a third laptop that has a battery as good as the latter but even worse memory — an effect that has clear applications in marketing practice. Surprisingly, renowned decoy studies have resisted replication, inducing scholars to challenge the scientific validity of the phenomenon and question its practical relevance. Using a treatment allocation scheme that takes inspiration from the lock-in amplification schemes used in experimental physics, we were able to explore the entire range of decoy attribute values and demonstrate that some of the reproducibility issues reported in the literature result from a suboptimal initial conditions. Furthermore, we demonstrate that our approach is able to sequentially identify the features of the decoy that maximize choice reversal. We thus reinstate the scientific validity and practical relevance of the decoy effect and demonstrate the use of lock-in amplification to optimize treatments.

Suggested Citation

Kaptein, Maurits C. and Emden, Robin and Iannuzzi, Davide, Tracking the Decoy: Maximizing the Decoy Effect Through Sequential Experimentation (November 2016). Palgrave Communications, Vol. 2, 2016. Available at SSRN: https://ssrn.com/abstract=2870872 or http://dx.doi.org/10.1057/palcomms.2016.82

Maurits C. Kaptein (Contact Author)

Tilburg University - Department of Methodology and Statistics ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Robin Emden

Leiden University ( email )

Postbus 9500
Leiden, Zuid Holland 2300 RA
Netherlands

Davide Iannuzzi

VU University Amsterdam - Faculty of Sciences

Amsterdam
Netherlands

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