Decoy pricing examples from The Economist experiment, cup sizes, popcorn and SaaS pricing pages: how a third option steers choice, and how to tell a decoy from a real tier.
Decoy pricing adds an option few people are meant to buy so another option looks like better value. The best-known case is The Economist subscription offer Dan Ariely tested; cup sizes, popcorn tubs and three-tier software plans use the same idea.
This page is part of Read Startup’s pricing case studies and one of the types of pricing strategies. It covers how a decoy steers choice, what the famous experiment did and did not show, and a test to tell a decoy from a real tier.
What is decoy pricing?
Decoy pricing, also called the decoy effect or asymmetric dominance, adds a third option that is clearly worse than a target option, so buyers switch toward the target. The decoy exists to change the comparison, not to sell.
The academic term comes from Joel Huber, John Payne and Christopher Puto, who described it in the Journal of Consumer Research in 1982. “Asymmetric dominance” means the decoy is beaten by the target on every count, but not clearly beaten by the other option. That one-sided comparison makes the target look like the obvious pick.
How does decoy pricing work?
The decoy is priced close to the target but offers less, so the target looks like a bargain. Buyers compare options with each other rather than with their own needs.
- Asymmetric dominance. The decoy is worse than the target and only the target, so it pulls attention to the target without helping the third option.
- Anchoring on the highest price. A high-priced option sets an anchor that makes the next one down look reasonable. Anchoring is the same effect premium pricing relies on.
- Three-tier structures. Most decoys appear in sets of three: a basic option, a target in the middle or top, and a decoy priced next to the target.
- Testing whether the decoy shifts mix. A decoy only earns its place if the share of buyers choosing the target goes up when it is shown.
What are real examples of decoy pricing?
In Ariely’s Economist test, 84% chose print plus web at $125 when a $125 print-only decoy was shown, against 32% without it. Cup sizes, popcorn tubs and SaaS tiers use the same pattern.
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| Example | Options | Decoy | Target | Source |
|---|---|---|---|---|
| The Economist offer (experiment) | Web $59; print $125; print + web $125 | Print-only at $125 | Print + web at $125 | Dan Ariely, Predictably Irrational (2008) |
| Coffee cup sizes | Small, medium, large | A middle size priced close to large | Large | Common pattern |
| Cinema popcorn | Small, medium, large | Medium priced just below large | Large | Common pattern |
| SaaS pricing pages | Basic, Pro, Enterprise | A tier priced to make the middle look best | “Most popular” tier | Common pattern |
The Economist: web-only $59, print-only $125, print + web $125
Dan Ariely saw an Economist subscription offer with three choices: web-only for $59, print-only for $125, and print plus web for $125. Nobody sensible would choose print-only. In an experiment with 100 MIT students, he found that with all three options shown, 84% chose print plus web and 16% chose web-only. When he removed the print-only option, only 32% chose print plus web and 68% chose web-only. The useless option more than doubled demand for the expensive one. Important caveat: this was Ariely’s experiment with MIT students, described in Predictably Irrational (2008), not The Economist’s own sales data. The combined offer also works like bundle pricing.
Coffee cup sizes
When a medium coffee costs only a little less than a large, the large looks like the better deal. Whether a given chain designs its sizes this way on purpose is not public; the pattern is what matters.
Cinema popcorn sizes
Popcorn tubs often follow the same pattern: a medium priced just below the large makes the large feel like a small step up for much more popcorn.
Software pricing pages with a “most popular” tier
Many software pricing pages show three plans and label one “most popular”. The plan next to it is often priced so the labelled plan looks like the best value. How the tiers are measured, by seats or usage, is a value-based pricing question.
When does decoy pricing fail?
Decoys fail when buyers notice the manipulation and lose trust, when the decoy accidentally sells and complicates operations, or when the lab effect turns out much smaller with real customers.
- Buyers notice and lose trust. An obviously pointless option makes the whole pricing page look like a trick.
- The decoy actually sells. If real customers buy it, you now support an option you designed not to sell.
- The effect is smaller in real markets. Lab experiments with students show strong shifts; real buyers who research, compare rivals and know what they need are harder to steer.
How can you tell a decoy from a genuine tier?
A genuine tier serves a real segment and sells; a decoy is chosen by almost nobody. Check purchase share by tier, and test removing the option: if the target’s share drops, it was working as a decoy.
- Check purchase share by tier. Divide purchases of each tier by all purchases.
- Look for a tier almost nobody buys. As a rule of thumb, a tier with under about 5% of purchases is either a decoy or a mistake.
- Ask who it is for. A genuine tier serves a distinct group of customers you could describe; a decoy serves none.
- Remove it and watch the mix. If the target’s share falls when the option is gone, the option was a working decoy. If nothing changes, it was clutter.
For a one-page comparison of every strategy, see the pricing strategy cheat sheet.
How can you apply decoy pricing to your own business?
Pick the option you want most people to buy, add a nearby option that is clearly worse value, A/B test the change in mix, and remove the decoy if it erodes trust or rarely shifts choice.
- Choose the target. Decide which option you want most people to buy, usually the one with the best margin and fit.
- Add a nearby option that is clearly worse value. Price it close to the target with noticeably less in it.
- A/B test the mix change. Show the decoy to half of visitors and compare the share choosing the target.
- Remove it if it erodes trust. Watch support tickets and reviews; if buyers call it a trick, take it down.
Frequently asked questions about decoy pricing
What is decoy pricing?
Decoy pricing is adding an option that few people are meant to buy, priced so another option looks like better value. It changes which option customers choose without changing the target’s price.
What is the decoy effect?
The decoy effect, or asymmetric dominance effect, is the tendency for people to prefer an option more when a clearly inferior version of it is added to the choice. Huber, Payne and Puto described it in 1982.
What was The Economist pricing experiment?
Dan Ariely showed 100 MIT students three offers: web-only $59, print-only $125 and print plus web $125. With the print-only decoy, 84% chose print plus web; without it, only 32% did. It was an experiment, not The Economist’s sales data.
Is decoy pricing ethical?
Decoy pricing is generally acceptable when every option is real, can be bought and is honestly described. It crosses a line when options are fake, hidden fees are involved, or the page misleads buyers about what they get.
How many pricing tiers should a SaaS have?
Most software companies use three tiers, because three gives a basic option, a target and a premium or enterprise option without overwhelming buyers. The right number depends on how many distinct customer segments you serve.
Open your pricing page, check the purchase share of every tier, and run the removal test on any option almost nobody buys. More pricing decisions are in our pricing case studies, or get one company decision broken down twice a week.
By the Readstartup Team. The Economist figures come from Dan Ariely’s published experiment; corrections are logged on our Corrections Policy page.
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