Salience, competition, and decoy goods

- A firm selling to salient thinkers can boost its demand by offering a decoy good.
- The optimal decoy good emphasizes the superior quality of the firm's main product.
- The optimal decoy good renders the price of the competing products salient.

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 manufacturer's main product and the unattractive feature of the fringe product are salient.