Dominance Effects in the Wild

Abstract 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.