Salience-Driven Decoy Effects in Stopping Problems

Traditional decision theory assumes that people respond to the exact features of the options available to them, but observed behavior seems much less precise. This review considers ways of introducing imprecision into models of economic decision making and stresses the usefulness of analogies with the way that imprecise perceptual judgments are modeled in psychophysics—the branch of experimental psychology concerned with the quantitative relationship between objective features of an observer's environment and elicited reports about their subjective appearance. It reviews key ideas from psychophysics, provides examples of the kinds of data that motivate them, and proposes lessons for economic modeling. Applications include stochastic choice, choice under risk, decoy effects in marketing, global game models of strategic interaction, and delayed adjustment of prices in response to monetary disturbances.

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Testing alternative explanations of phantom decoy effects

Journal of Behavioral Decision Making ◽

10.1002/bdm.557 ◽

2007 ◽

Vol 20 (3) ◽

pp. 323-341 ◽

Cited By ~ 42

Author(s):

Jonathan C. Pettibone ◽

Douglas H. Wedell

Keyword(s):

Decoy Effects

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Comparison-induced decoy effects

Memory & Cognition ◽

10.3758/bf03195321 ◽

2005 ◽

Vol 33 (2) ◽

pp. 332-343 ◽

Cited By ~ 33

Author(s):

Jessica M. Choplin ◽

John E. Hummel

Keyword(s):

Decoy Effects

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Decoy effects and attribute-level inferences.

Journal of Applied Psychology ◽

10.1037/0021-9010.84.5.823 ◽

1999 ◽

Vol 84 (5) ◽

pp. 823-828 ◽

Cited By ~ 33

Author(s):

Jerel E. Slaughter ◽

Evan F. Sinar ◽

Scott Highhouse

Keyword(s):

Attribute Level ◽

Decoy Effects

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A map of decoy influence in human multi-alternative choice

10.31234/osf.io/p85mb ◽

2020 ◽

Author(s):

Tsvetomira Dumbalska ◽

Vickie Li ◽

Konstantinos Tsetsos ◽

Christopher Summerfield

Keyword(s):

Decision Making ◽

Simple Model ◽

Irrelevant Information ◽

Incentive Compatible ◽

Special Cases ◽

Human Decision ◽

Human Participants ◽

Alternative Choice ◽

Decoy Effects ◽

Attribute Space

Human decisions can be biased by irrelevant information. For example, choices between two preferred alternatives can be swayed by a third option that is inferior or unavailable. Previous work has identified three classic biases, known as the attraction, similarity and compromise effects, which arise during choices between economic alternatives defined by two attributes. However, the reliability, interrelationship, and computational origin of these three biases has been controversial. Here, a large cohort of human participants made incentive-compatible choices among assets that varied in price and quality. Instead of focusing on the three classic effects, we sampled decoy stimuli exhaustively across bidimensional multi-attribute space and constructed a full map of decoy influence on choices between two otherwise preferred target items. Our analysis revealed that the decoy influence map was highly structured even beyond the three classic biases. We identified a very simple model that can fully reproduce the decoy influence map and capture its variability in individual participants. This model reveals that the three decoy effects are not distinct phenomena but are all special cases of a more general principle, by which attribute values are repulsed away from the context provided by rival options. The model helps understand why the biases are typically correlated across participants and allows us to validate a new prediction about their interrelationship. This work helps to clarify the origin of three of the most widely-studied biases in human decision-making.

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