Dominance Effects in the Wild

In real-world marketplaces, one may encounter an alternative that is inferior to another one in the assortment. While the presence of such seemingly irrelevant inferior alternatives should ostensibly have no influence on consumers' decisions, an extensive literature using stylized lab experiments has found that, surprisingly, their presence matters. Specifically, the dominance effect suggests that the presence of an inferior alternative shifts consumer's preferences toward the alternative made to be superior. However, null results in some recent lab studies and a lack of real-world evidence call into question whether, when, and how the effect exists. In this work, we find clear evidence that dominance matters in the wild. We also identify an important moderator for the dominance effect-preference uncertainty-and test it in both a real-world marketplace for digital freelance services and a lab experiment. Further, we find evidence for additional moderators that help explain how the effect works, including the count of dominated alternatives and the magnitude of dominance, consistent with a perceptual mechanism. This work is the first to use consequential field data to shed light on when and why the dominance effects occur, with implications for marketers, choice architects, user interface designers, and policymakers.

Automated summary

In real-world marketplaces, the presence of inferior alternatives can influence consumers' decisions, known as the dominance effect. However, recent lab studies have yielded null results, raising doubts about the existence, timing, and mechanism of this effect. This study provides evidence that the dominance effect does exist in real-world contexts, and identifies preference uncertainty as a key moderator. The findings also suggest the presence of other moderators, such as the count and magnitude of dominated alternatives, supporting a perceptual mechanism. This research sheds light on the occurrence and mechanisms of the dominance effect, with implications for marketers, choice architects, user interface designers, and policymakers.