The impact of decoys and background information on consumers' preferences and decision making

Abstract

A great deal of attention has been paid to the study of context effects, and it is now acknowledged that the composition and framing of the choice set influences the final choice. This study focuses on three of the most frequently quoted and debated issues: namely, attraction effect, background information and phantom options. It aims to analyse empirically their interplay and combination, responding to recent calls by the most relevant literature for such a study. A large data-set of 1100 potential consumers is used for this purpose, collected by means of a website for the sale of products. Results show that context effects are not independent, and should therefore be considered together to provide a better understanding of decision making. By manipulating the placement of a decoy option, the nature of the decoy and the consumers' background, one can in fact influence consumers' preferences and amplify or reduce the magnitude of certain evaluative ‘abnormalities’ in a very specific way. Managerial implications and directions for future research are addressed.

Keywords:

• consumer preferences
• consumer decisions
• decoys
• choice sets
• phantom options
• context effects on decisions

Notes

1. Referring to the classification by Farquhar and Pratkanis (1992), the present analysis considers the case of a known phantom, namely that consumers know the option is not available for choice.