Let's say you are an ice-cream lover. You find great value in eating ice-cream.
One fine day, you are out to treat yourself.
Shopkeeper provides you below options:
Shopkeeper provides you below options:
One Scoop Ice Cream: 13 bucks
Two Scoop Ice Cream: 19 bucks
Three Scoop Ice Cream: 19.5 bucks
The negligible difference between the prices of 2nd and 3rd options gets your attention.
This is called the Decoy Effect.
A 2nd option is just a Decoy option. Companies provide a decoy option so that customers can compare the Decoy option with an expensive option (and select the expensive one).
In the absence of a decoy option, the customer will compare: 13 bucks vs 19.5 bucks - and may probably go with a cheaper option.
But with decoy option, the customer now compares 19 bucks vs 19.5 bucks - and most likely selects the expensive option.
Can you see a similar pattern in the pricing of iphone11 by Apple?
iPhone: $ 699
iPhone Pro: $ 999
iPhone Pro max: $ 1099
Yes, Apple does use the Decoy effect to drive a consumer to buy the expensive version of their product. Not only they are making quality products, but also they are not leaving any stone unturned when it comes to marketing and selling their products.
Explained very well in Dan Ariely's book "Predictably Irrational".
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