What is the Decoy Effect Cognitive Bias?

Описание: The Decoy Effect is a cognitive bias that lures us into buying more than we need. By introducing an additional BAD choice, the less expensive choice seems MEAGER, and the most expensive choice appears to be a GREAT VALUE.

The Decoy Effect has four steps:

1) Identify the most appealing COMPETITOR
This is typically a low-profit, inexpensive choice. The $5 popcorn is the item we are most likely to buy.

2) Identify the TARGET
This is the choice they want us to buy, the $9 popcorn. It’s more expensive and therefore much more profitable.

3) Insert the DECOY
A great DECOY will have a feature that is just slightly better than the COMPETITOR. The $8 popcorn has only slightly more popcorn than the $5 option.

4) Overprice the DECOY
$8 for a medium-sized popcorn seems like a bad deal. For just one dollar more, you can get the huge bucket of popcorn. By making the DECOY only slightly less expensive than the TARGET, the TARGET appears to be a great bargain.

A great DECOY will be close in features to the COMPETITOR, but close in price to the TARGET. The rotten deal of the DECOY makes the supersized TARGET look like a real bargain.

How can you avoid the Decoy Effect?

1) Beware of sales pitches that come in threes, and product information that compares features side by side. Anything that is labeled “best value” or “best bargain” is the target.

2) Actively seek out the DECOY. Look hard for the one option that seems to be a terrible deal.

3) Don’t trust your gut. A recent study shows that people who primarily rely on intuition tend to fall for the Decoy Effect more often.

Finance psychology expert Graeme Newell explains how our very flawed human brain tends to slip up when we make big finance and life decisions.

Most of our decision-making is done in our subconscious brain. When we make a choice, what happens is that our subconscious brain feels something and then our conscious brain affirms what we already believe.

Overcoming cognitive bias in decision making is not hard. It’s simply a matter of learning to recognize the signs that a cognitive bias might be likely, then stopping the pattern.

Behavior biases in finance show up all the time. Behavioral science shows us the way forward and gives us smart tactics for making optimal decisions. The key is to learn tactics from finance psychology and behavioral finance concepts that we can put into action throughout the course of our day.

Graeme Newell is a researcher in behavioral investing, behavioral economics and finance psychology. He is a professional economics speaker, a personal finance speaker and an expert in behavioral investing.

In this video you’ll learn all about how cognitive bias can trick us into making foolish choices. You’ll learn specific ways to recognize the signs that a bad decision is likely, then how to quickly get back on track.

Watch this video to learn about the new research that’s revealing the best strategy for making smarter decisions.

🔴 Subscribe for more videos just like this: https://bit.ly/3atitPl

About Graeme’s Channel:
I’m a researcher, speaker and author who specializes in behavioral finance. I take perverse pleasure in putting people inside of brain scanners, then asking them to make important money decisions.

My videos reveal the vulnerable situations when business leaders and everyday people are most likely to make crazy-bad, impulsive money decisions. I teach how to use brain science insights to make smarter decisions that grow businesses and increase wealth.

Learn more about how brain science insights can help you make smarter decisions:
https://graemenewell.com/