Have you ever stood in line at a movie theater, stared at the menu board, and felt your brain glitch?
You look at the prices:
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Small Popcorn: $6.00
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Medium Popcorn: $7.00
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Large Popcorn: $7.50
You probably walked in wanting the Small. It’s enough food.
But then you look at the Medium. It’s only $1 more.
Then you look at the Large. It is only 50 cents more than the Medium, but it’s double the size!
In that moment, a logical voice in your head screams: “I would be stupid not to get the Large. It is clearly the best value.”
So you buy the Large. You eat half of it, feel sick, and throw the rest away.
Congratulations. You just fell for the most powerful psychological trick in retail: The Decoy Effect.
The theater never wanted you to buy the Medium. The Medium is a “Decoy”—a dummy option created solely to make the Large look like a bargain.1
Here is how Apple, Starbucks, and subscription services use this exact same trick to make you spend 30% more than you planned.
1. The Psychology: What is “Asymmetric Dominance”?
In behavioral economics, this is formally called Asymmetric Dominance.
It describes a glitch in the human brain. We are terrible at judging “Absolute Value” (is this phone worth $1,000?). But we are amazing at judging “Relative Value” (is this phone better than that phone?).
Companies exploit this by giving you three options:
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The “Competitor” (Low End): Cheap price, basic features.
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The “Target” (High End): High price, great features. (This is what they want you to buy).
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The “Decoy” (The Trap): High price, but worse features than the Target.
The Decoy exists only to make the Target look superior.
2. The “iPhone Ladder”: How Tech Giants Upsell You
Apple, Samsung, and Google are masters of this. They use the Decoy Effect to manipulate storage pricing.
Let’s look at a hypothetical pricing structure for a new flagship phone.
| Model | Storage | Price | Your Brain’s Reaction |
| Option A | 128GB | $799 | “That’s a lot of money for base storage.” |
| Option B (Decoy) | 256GB | $899 | “For $100 more, I get double space? Maybe…” |
| Option C (Target) | 512GB | $999 | “Wait, for just $100 more than that, I get HUGE space? Deal!” |
The Trap:
If Option B (256GB) didn’t exist, you would compare the $799 phone to the $999 phone. You would likely say: “I don’t need to spend an extra $200.”
But because Option B is there, priced awkwardly high ($899), it pushes you up the ladder. You stop comparing the $999 phone to the cheap one. You compare it to the middle one.
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“The 512GB model is only $100 more than the 256GB model. It’s a no-brainer!”
You walked in planning to spend $799. You walked out spending $999. The Decoy did its job.
3. The “Coffee Cup” Illusion
Starbucks uses this trick every single day.
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Tall (Small): $3.75
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Grande (Medium): $4.50
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Venti (Large): $4.95
Look at the gap between Medium and Large. It is 45 cents.
The liquid difference is massive (16oz vs 24oz).
The “Grande” is the Decoy. It is priced so close to the Venti that the Venti feels free.
But ask yourself: Do you actually need 24 ounces of milk and sugar?
If you buy the Venti because it is “good value,” but you only drink 16 ounces, you didn’t save money. You donated 45 cents to Starbucks for liquid you poured down the drain.
4. The “Ugly Brother” Theory
Dan Ariely, a famous behavioral economist, explains this effect using dating.2
If you want to look more attractive at a party, bring a friend who looks similar to you, but slightly less attractive.
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Compared to the supermodels at the party, you might look average.
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But compared to your “slightly less attractive” friend (The Decoy), you look like a Superstar.
This is exactly what The Economist magazine did with their subscriptions:
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Option 1: Digital Only ($59)
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Option 2: Print Only ($125) -> The Decoy
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Option 3: Print + Digital ($125) -> The Target
When students saw this, 84% chose Option 3. Why? Because getting “Print + Digital” for the same price as “Print Only” felt like they were getting the Digital version for free.
When the Decoy (Option 2) was removed, most people chose the cheapest option.
5. How to Beat the Decoy (The “Robot” Method)
Now that you know the trick, you can stop falling for it. You need to remove emotion from the purchase.
Step 1: Define Your Needs First
Before you look at the price menu, ask yourself: “What do I actually need?”
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“I need 128GB of storage.”
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“I want a small coffee.”
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“I can only eat a small bag of popcorn.”
Step 2: Ignore the “Value,” Look at the Cost
If you choose the Large Popcorn, you are spending $7.50.
If you choose the Small Popcorn, you are spending $6.00.
$6.00 is less than $7.50. Period.
“Value” doesn’t pay your rent. Cash pays your rent.
Step 3: The “Waste” Calculation
If you buy the 512GB phone because it was a “good deal,” but you only ever fill up 100GB, you have wasted $200 on empty silicon.
Unused capacity is not an asset; it is a liability.
Conclusion: Stick to the Basics
The “Smart Price” is rarely the Middle option, and it is rarely the Target option.
The Smart Price is almost always the Base Model.
Companies work very hard to make the Base Model look unappealing. They want you to feel “cheap” for buying it.
Don’t feel cheap. Feel smart. You just saved money by outsmarting a team of PhD psychologists.