Why adding a third tier sells the second
The expensive option is not there to be bought. It is there to change what the middle option looks like, and it does that job without ever being chosen.
Filed by The Archivist 2 min read
Intuition test — answer before you read on
A page shows two plans. A third, much pricier plan is added. What typically happens to sales of the middle plan?
Correct answer: B
They rise. The added option is rarely bought; its function is to reframe the one below it. Preferences are built by comparison, so changing what is on the shelf changes what looks reasonable.
A pricing page has two plans and the cheaper one wins. A third plan is added at the top, absurdly priced, and suddenly the middle plan starts winning. Nothing about the middle plan changed — not the price, not the features, not the description. Only its neighbours did.
What everyone sees
Three tiers, each with a clear feature list, arranged for easy comparison. You examine them, reject the extremes as either inadequate or extravagant, and select the sensible one. The reasoning is explicit and you could reconstruct it on request.
What is actually happening
Preferences are constructed by comparison, not retrieved from storage. Adding an option changes the comparison set, and changing the comparison set changes the ranking — which is why the effect breaks a rule economists once assumed was safe. A dominated third option makes the middle one look moderate; without it, the middle one was simply the expensive one. Restaurant wine lists, subscription pages and hardware configurators are all built on this.
Why it stays hidden
Because you did evaluate the options. The evaluation was real, careful and honest — it was just performed on a set that somebody else assembled. Nobody experiences a pricing table as an argument, so nobody audits it as one.
The premium tier nobody buys is not a failure. It is the instrument that decides what the tier below it appears to cost.
The premium tier nobody buys is not a failure. It is the instrument that decides what the tier below it appears to cost.
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The premium tier nobody buys is not a failure. It is the instrument that decides what the tier below it appears to cost.
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Sources & further reading 3
- Huber, Payne & Puto, "Adding Asymmetrically Dominated Alternatives", Journal of Consumer Research, 1982
- Ariely, "Predictably Irrational", 2008 — chapter on relativity
- Simonson & Tversky, "Choice in Context: Tradeoff Contrast and Extremeness Aversion", 1992
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