*What is the Decoy Effect? Link this in Stock Markets and Personal life.
*
The decoy effect describes how, when we are choosing between two alternatives, the addition of a third, less attractive option (the decoy) can influence our perception of the original two choices.
Decoys are completely inferior to one option (the target) but only partially inferior to the other (the competitor).
Let's say like me, you are an ice cream lover.
One fine day, you are out to treat yourself. Shopkeeper provides you below options:
One Scoop Ice Cream: Rs 13
Two Scoop Ice Cream: Rs 22
Three Scoop Ice Cream: Rs 25
The negligible difference between the prices of 2nd and 3rd options gets your attention.
This is called Decoy Effect.
A 2nd option is just a Decoy option. Companies provide decoy options so that customers can compare the Decoy option with an expensive option (and select the expensive one)
Decoys capitalize on loss aversion
As humans, we hate losing more than we like winning. Loss aversion describes how, for most people, it is more unpleasant to lose a given amount than it is pleasant to gain an equivalent sum. Exactly how we behave in stock markets also.
The decoy effect is made all the more pernicious by the fact that we do not realize we are being manipulated, instead feeling like we are making the logical choice.
Don't let the Decoy effect play your investment decisions in markets also in our personal life.
All this is multiplex logic where the cost of the product really doesnt matter to the price tag
Here it is more of target $$ per head.
You wont see this in fmcg at Kirana store
(one anomaly example is not proof of theory)
And in fmcg there is inverse theory also of minimal size cost.
So like shampoo sachet of equal volume cost less than bottle, oil puches etc
or smallest packs cost less than bulker size
*What is the Decoy Effect? Link this in Stock Markets and Personal life.
*
The decoy effect describes how, when we are choosing between two alternatives, the addition of a third, less attractive option (the decoy) can influence our perception of the original two choices.
Decoys are completely inferior to one option (the target) but only partially inferior to the other (the competitor).
Let's say like me, you are an ice cream lover.
One fine day, you are out to treat yourself. Shopkeeper provides you below options:
One Scoop Ice Cream: Rs 13
Two Scoop Ice Cream: Rs 22
Three Scoop Ice Cream: Rs 25
The negligible difference between the prices of 2nd and 3rd options gets your attention.
This is called Decoy Effect.
A 2nd option is just a Decoy option. Companies provide decoy options so that customers can compare the Decoy option with an expensive option (and select the expensive one)
Decoys capitalize on loss aversion
As humans, we hate losing more than we like winning. Loss aversion describes how, for most people, it is more unpleasant to lose a given amount than it is pleasant to gain an equivalent sum. Exactly how we behave in stock markets also.
The decoy effect is made all the more pernicious by the fact that we do not realize we are being manipulated, instead feeling like we are making the logical choice.
Don't let the Decoy effect play your investment decisions in markets also in our personal life.
If you are two people with each wanting a scoop each beforehand, you might be better choosing option 2.
The problem arises if you get tricked into buying more (3) of what you didn't already need.
Also, depends on the item. If it's washing machine liquid, I will choose option 3 even if I had planned on buying 2.
If it's ice-cream, I will stick to option 2, even if 3 is more attractive.
i think if i meet such a icecream mans, i will easy make money to go home in rickshaw
as 13 is my lucky number, by default i will just eat 1 icecream as it is rs 13 n go away
but i cannot misses business oppotunity
i buy 3 icecream for rs 25 , n do it 4 times, now i has 12 icecream for rs 100 n already customers is around icecream shop, i tell customers y to pay 30% more, rs 13 icecream i give for rs 10 so i sell them each icecream for rs 10 n total sell is rs 120, so it is 20% profit on rs. 100 investment
only drawback is if less customers than icecream will a melted as we has too much summer n very less return on investment
not sure what will happen, after a big trending day, mostly there is a sideways day, n tomorrow is thursday so it would be good for premium decay also n then friday can be trending in which there will be very less movement in options lets c how things unfold
i think if i meet such a icecream mans, i will easy make money to go home in rickshaw
as 13 is my lucky number, by default i will just eat 1 icecream as it is rs 13 n go away
but i cannot misses business oppotunity
i buy 3 icecream for rs 25 , n do it 4 times, now i has 12 icecream for rs 100 n already customers is around icecream shop, i tell customers y to pay 30% more, rs 13 icecream i give for rs 10 so i sell them each icecream for rs 10 n total sell is rs 120, so it is 20% profit on rs. 100 investment
only drawback is if less customers than icecream will a melted as we has too much summer n very less return on investment
if i was icecream shopkeeper, i m use startagy of big foren business
i give 1 simple example of human psychology in shopping
person go market, person buy rs 20 vegetable, person argue with innocent vegetable vendor n he make it rs. 15, person feel happy
person go pantaloon shop in mall person like nice jeans, mrp = 2000, person quietly buy the costly jeans, as there is no one to argue or bargain
so if i icecream man, i install robot n he selled icecream for me, n no one argue or bargain or discount, give money for 1 icecream n took 1 icecream, very simple programming, nothing complex we can easily making simple robot with rs 2300 arduino circuits and c++
Today i had 1 lot of 40400 pe, at end of day it's price was only around 10rs, though banknifty spot was at 40330. Can someone please explain why it didn't became 70..
Today i had 1 lot of 40400 pe, at end of day it's price was only around 10rs, though banknifty spot was at 40330. Can someone please explain why it didn't became 70..