Supermarkets are carefully designed to shoppers to spend more. Everyday such as milk and eggs are often placed at the back of the , so customers must walk many other products to reach them. Products placed at eye tend to sell better than those on high or low . The smell of fresh bread near the entrance may shoppers feel , and shoppers tend to more.

Imagine a coffee shop that sells a small coffee for $3 and a large one for $5. Many customers choose the small size. Now suppose the shop adds a medium coffee for $4.75. Suddenly, the large coffee looks like a bargain compared with the medium, and more customers choose it. The medium option may hardly sell at all, but it changes how people see the other choices. Marketers call this the decoy effect.

The behavioral economist Dan Ariely described a well-known example. A magazine offered an online subscription for $59, a print subscription for $125, and a combined print-and-online subscription, also for $125. Almost no one chose print alone, but its presence made the combined offer look extremely attractive. When Ariely removed the print-only option in a test with students, many more chose the cheaper online subscription.

The decoy effect works because people often judge value by comparison rather than in absolute terms. It is hard to know whether $5 is a fair price for coffee, but easy to see that it is only slightly more than $4.75.

Being aware of decoys can help consumers make choices based on what they actually need, not on how the options are arranged.