Analysing the Decoy Effect on Online Product Purchasing Preference: An Experimental Study

Abstract

Why would one want to buy expensive popcorn at the cinema, while they could get the same with much lower price in supermarket?Economically speaking, it is a rip off.However, there is an effective psychological technique called the decoy effect that could affect our economical thinking in a way that the targeted good will be purchased even if it is overpriced.Earlier research showed that consumer's preference could be shifted when there are three options: the target, competitor, and decoy.In this IR 4.0, sellers' market their products through digital marketplaces to reach more consumers worldwide.This research analyses whether the decoy effect exists in Indonesia's digital marketplace, and what effect does customers' review has on it.Data are collected through online surveys by replicating an online shopping choice sets for a trash bin.We choose marketplace Shopee as it has some features enabling us to do the experiment.The control and treatment 1 choice-sets are used to test whether the decoy effect exists in digital market.Treatment 2 is used to measure the strength of a decoy with smaller/bigger amount of buyers, and Treatment 3 measures the strength of a decoy with positive/negative reviews.A total of 90 subjects are randomly given one choice-set.Results show that decoy effect exists in digital marketplace Shopee.Amount of buyers influences the strength of the decoy effect; smaller amount weakened it, bigger amount strengthen it.Data also suggests that decoy with negative review reduces the strength of its effect, vice versa.

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