Choice-induced value updating reveals two paths to a decoy effect

The decoy effect is a classic example of irrational decision making, where adding an inferior third option (the decoy) shifts preference toward a similar, superior option (the target) over an otherwise equally attractive competitor. Although robust, the underlying mechanisms of this effect remain debated. Evidence from decision science suggests people make multi-option choices through pairwise comparisons: they first compare two options, then pit the winner against the remaining option. However, theories disagree on which comparison sequence produces the decoy effect. One account argues the effect only emerges when people first compare the competitor and decoy, because the target then needs to win only one comparison instead of two. In contrast, evidence from attention research suggests people compare the target and decoy first because of their similarity. We propose a mechanism that reconciles these accounts. Our framework assumes that the act of choosing increases the subjective value of the option that wins the first comparison and that individuals differ in the magnitude of this boost. Through simulations, we showed that when this increase is small, the decoy effect emerges only when the competitor and decoy are compared first, but when it is large, it emerges only when the target and decoy are compared first. We tested this prediction in a preregistered sequential-choice version of the decoy paradigm and found that first comparisons influenced target selection differently across individuals. Behavioral results and computational modeling confirmed that participants with larger value increases showed stronger decoy effects when the target and decoy were compared first. This work proposes that choice-induced value changes provide a unifying mechanism that accounts for existing theoretical contradictions and explains individual differences in the decoy effect.