Decoy Pricing

A three-tier pricing strategy where a middle option is made deliberately less attractive relative to the premium option, steering customers toward the highest margin choice through contrast rather than persuasion.

Decoy pricing exploits the human tendency to make relative rather than absolute value judgements. When a slightly larger option is priced only marginally higher than the smaller option, the larger option consistently wins.

A cinema: small popcorn £4.50, medium £7.00, large £7.50. The medium is the decoy. At 50p more than the medium, the large seems irrational not to choose. Most customers pick large, generating higher revenue per transaction than without the medium.