Decoy Effect

The phenomenon in which adding a third, asymmetrically dominated option shifts preference between two existing options. An asymmetrically dominated option is one that is clearly inferior to one alternative but not to all. In pricing, the top tier often serves as a decoy: it is priced high and packed with features few customers need, making the middle tier look like better value by comparison. The effect was first demonstrated in controlled experiments and has since become a standard element of three-tier pricing architecture. The decoy does not need to generate its own sales; its value lies in redirecting choice toward the target option.

Example: Williams-Sonoma introduced a $429 bread maker beside an existing $275 model; sales of the $275 model doubled because the higher-priced option made it appear more reasonable.