#1: Which would you choose? 

2: Which would you choose? 

Teacher instructions:

• Only show 1/2 the class Question #1 and jot down the results (the percentage who chose small, the percentage who chose large)
• Show the other 1/2 of the class Question #2 and jot down the results (percentage who chose small, percentage who chose medium, percentage who chose large) 
• Compare the results to see if students who answered Question #2 purchased more of the LARGE buckets compared to students who answered Question #1. The "decoy" effect suggests that students answering Question #2 will choose the LARGE bucket of popcorn more than those answering Question #1. 

What just happened? This National Geographic video explains the phenomenon known as the Decoy Effect.

Questions:

• Name at least two other examples in your life where you have seen examples of the "decoy effect.”
• Why do you think the "decoy effect" is so effective at getting consumers to buy more of something?
• What can you do to avoid this form of manipulation?

Click here for the ready-to-go slides for this Question of the Day that you can use in your classroom.

Behind the numbers (from HumanHow):

The decoy effect is a phenomenon whereby consumers will tend to have a specific change in preferences between two options when also presented a third option that is asymmetrically dominated. 

In simple words, when there are only two options, consumers will tend to make decisions according to their personal preferences. But when consumers are offered another strategical decoy option, they will be more likely to choose the more expensive of the two original options.

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Be sure to check out NGPF's NEW! Behavioral Finance Lessons in the revamped Semester Course! 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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