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The decoy effect: Why you overspend

By Winnie Makena | February 20th 2020 at 05:00:00 GMT +0300

Many things come in a variance of sizes - small, medium and large. Usually, the medium one is slightly cheaper than the large. Have you ever opted for the biggest option?

If so, then you have fallen prey to a cognitive bias called the decoy effect.

This is when a slightly less attractive, more expensive option is added to make an alternative option look more attractive, hence making you pay more than you would.

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The decoy effect influences everything, from buying our morning coffee to choosing an electoral candidate.

We even see it in property sales. A one-bedroom house could be priced at Sh12 million, a slightly bigger studio apartment at Sh16 million and two-bedroom at Sh18 million.

The studio offer (the decoy) is asymmetrically dominated by the two-bedroom offer and thus increases the latter’s attractiveness.  

The decoy effect Real Estate Housing Finance Buying a home
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