Salience, competition, and decoy goods

Herweg, Fabian; Müller, Daniel; Weinschenk, Philipp

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Salience, competition, and decoy goods

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Weinschenk, Philipp
Max Planck Institute for Research on Collective Goods, Max Planck Society;

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http://dx.doi.org/10.1016/j.econlet.2016.12.026
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Citation

Herweg, F., Müller, D., & Weinschenk, P. (2017). Salience, competition, and decoy goods. Economics Letters, 153, 28-31.

Cite as: https://hdl.handle.net/11858/00-001M-0000-002C-4BCA-6

Abstract

We consider a brand manufacturer who can offer, next to its high-quality product, also a decoy good and faces competition by a competitive fringe that produces low quality. We show that the brand manufacturer optimally provides a decoy good to boost the demand for its main product if consumers’ purchasing decisions are distorted by salient thinking. The optimal decoy good is designed such that the superior quality of the brand manufacturers’ main product and the unattractive feature of the fringe product are salient.