Reversal of the Decoy Effect: Minimizing the Decoy Effect Through Promotional Strategies from the Viewpoint of Rivalry

Abstract This paper explores how firms counteract the decoy effect by using promotional strategies. The decoy effect is a phenomenon that consumers' choices or preferences between two alternatives are affected when presented with a third choice. While previous studies have mainly focused on how decoys are used by firms to sway consumer choices, little attention has been paid to strategies to reverse this effect. The pretests of this study confirmed that consumers' preferences for quality and price of products were disrupted by the decoy. Through the experiments with 216 participants, the results of Study 1 and Study 2 revealed that the effect of promotional strategies, buy‐one‐get‐one‐free and bonus packs, can effectively neutralize the decoy effect set by competitors and lead to an increased preference for the focal firm's products. The findings underline both the validity of the decoy effect and the reversal effect of decoys triggered by promotional strategies.