An integrative review of the decoy effect on choice behavior

Since 1982, the decoy effect has been one of consumer behavior literature's most discussed and documented phenomena. It has several managerial implications in gaining strategic advantages, such as product management and profit maximization. Numerous attempts have been made to explain the decoy effect. However, there is no clear consensus in the literature regarding the underlying mechanism of the decoy effect. This paper presents a systematic literature review to integrate the four decades of decoy effect research. We analyze the contribution of literature, establish linkages between them, and provide a holistic view of understanding the decoy effect that is beneficial for academicians and practitioners. We discuss and differentiate four types of decoy alternatives that produce three types of decoy effects: attraction effect, compromise effect, and phantom decoy effect. We provide a comprehensive list of moderating factors of the decoy effect. Further, we critically review and integrate various explanatory models to better understand the underlying mechanism of the decoy effect. Finally, we discuss several promising avenues for future research.