Story@BFBV: The Wine Bottles Story

Look at the price tags on the wine bottles. Which one will you buy, assuming you don’t know the wine? Most people choose the $95 bottle. They don’t want to look cheap by buying any of the $15 bottles. And the $150 looks so much more expensive. Bingo, you fell for the decoy trap. The purpose of the $150 bottle (the decoy) placed right next to the $95 bottle it to make it look so much cheaper. It seems the way to sell a pair of $800 shoes is to put them right next to a few pairs of $1,200 ones.

When valuing something, beware of what you just saw before.

Beware of decoys in wines and stocks.


One thought on “Story@BFBV: The Wine Bottles Story

  1. Hersh Tolani says:

    This is a brilliant phenomena (and a very scary fallacy).
    I just felt like expanding on the topic:

    Suppose that two devices are available:
    Consideration Set 1
    A B
    price Rs. 400 Rs. 300
    storage 30GB 15GB

    In this case, some consumers will prefer A for its greater storage capacity, while others will prefer B for its lower price.

    Consideration Set 2
    A B C
    price Rs. 400 Rs. 300 Rs. 450
    storage 30GB 15GB 25GB

    The addition of C causes A to be chosen more often than if only the two choices in Consideration Set 1 existed; C affects consumer preferences by acting as a basis of comparison for A and B. Because A is better than C in both respects, while B is only partially better than C, more consumers will prefer A now than did before. C is therefore a decoy whose sole purpose is to increase sales of A.

    Conversely, suppose that instead of C, a player D is introduced:

    Consideration Set 3
    A B D
    price $400 $300 $350
    storage 30GB 15GB 10GB

    The result here is similar: consumers will not prefer D, because it is not as good as B in any respect. However, whereas C increased preference for A, D has the opposite effect, increasing preference for B.

Comments are closed.