Agnieszka runs a small yoga studio above a bakery. She is rewriting her prices page, and she has two passes: five classes for €80 and ten classes for €140.
Most people buy the five-class pass. She suspects many of them come more often than that and end up buying a second one.
A friend who works in marketing tells her about a trick. Add an eight-class pass at €140, he says. Nobody will buy it, but it makes the ten-class pass look like a steal. Another friend says to make everything end in 9. A third says to put a big “was €160” next to the ten-class price.
One of those suggestions is weaker than its reputation. One is a small, real effect. And one would be illegal in the EU.
Agnieszka and her studio are imagined. The research, laws and court rulings below are real.
No price is seen alone
Is €140 a lot for ten yoga classes? There is no answer without a comparison. Against a €18 drop-in class it looks generous. Against a €39 monthly gym membership it looks expensive. Against nothing at all, most people find it hard to say.
That is the shared idea behind everything in this chapter. People judge prices relative to reference points: other prices on the page, prices they remember, the price they expected, the number of payments they will make. A pricing page is mostly a set of reference points, chosen deliberately or by accident.
Some of those reference points are honest help. A clear comparison between plans helps people choose. Others work by exploiting a quirk. This chapter covers both, because the line between them is where the law now sits too.
We have a separate tip on one piece of this: why the middle plan often wins, with a live demo and real pricing pages. Here we go wider and deeper.
Do this: before changing any price, list the comparisons a visitor is likely to make: your other options, competitors, the cost of doing nothing. Then decide which of them your page should make easy.
The wheel of fortune
The most famous demonstration of anchoring did not involve a price at all.
In their 1974 paper in Science, Judgment under Uncertainty: Heuristics and Biases, Amos Tversky and Daniel Kahneman described an experiment in which people estimated quantities such as the percentage of African countries in the United Nations. Before each estimate, a number between 0 and 100 was produced by spinning a wheel of fortune in front of them. Participants first said whether the true value was higher or lower than that number, then gave their estimate.
People often estimate by starting from an initial value and adjusting, and the adjustment tends to stop short. In the paper's example, groups who got 10 and 65 from the wheel gave median estimates of 25% and 45%. The authors report that payoffs for accuracy did not reduce the effect. The anchor was obviously random, which is what made the result so striking.
On a pricing page, the anchors are rarely random. The first price people see, a higher-priced option next to yours, a “typical agency charges” comparison: all of these become starting points. An honest anchor is a real alternative the visitor might consider. A dishonest one is a number invented to make another number look small, and the clearest example, the fake “was” price, is now regulated in the EU, as we will see below.
Do this: decide what the first price on your page should be. If you lead with your most popular option, that is the anchor. If you show a premium option first, make sure it is one someone could genuinely want.
The option nobody picks
Agnieszka's friend was describing the decoy effect, also called the attraction effect or asymmetric dominance.
Adding an option that is clearly worse than one alternative (the target) but not clearly worse than another (the competitor) can increase the share choosing the target. Huber, Payne and Puto designed it as a test of “regularity”, a core assumption of rational choice theory that adding an option can never increase the share of an existing one. In their studies the decoy itself was chosen only about 2% of the time, showing that people noticed it was dominated.
The Economist story, and what happened next
The decoy became famous through Dan Ariely's 2008 book Predictably Irrational and his TED talk. He described an old Economist subscription offer: web only for $59, print only for $125, or print and web for $125. In the talk, he says he gave the offer to 100 MIT students, most of whom chose the combination and none of whom chose print only. When he removed the print-only option and gave the list to another 100 students, the most popular option became the least popular. (The book reports exact percentages; we cite the talk because it is the version we could check.)
It is a great classroom demonstration. Whether it predicts what happens on your pricing page is a different question, and the research since then has been sobering.
Yang & Lynn, 2014
Ninety-one attempts to produce an attraction effect across 23 product classes yielded only 11 reliable effects, fewer than the studies' statistical power predicted. When options were described with meaningful words or pictures rather than numbers, effects fell to chance levels.
Frederick, Lee & Baskin, 2014
Found the effect mostly with stylized descriptions where every attribute is a number. It did not typically appear when people experienced the product, such as tasting a drink, or when an attribute was shown perceptually, such as a hotel room's quality in a photo.
Kaptein, Van Emden & Iannuzzi, 2016
In an online experiment with 7,125 respondents, they included the Economist scenario, which earlier work had failed to replicate. They argue the original decoy was poorly positioned and that moving it produced larger effects.
The original authors replied in the same journal issue, in “Let's Be Honest about the Attraction Effect” (2014). They argue the effect replicates when the original conditions are reproduced, and agree it has important boundaries. Both sides can be right. A decoy can shift choices in a tidy, numbers-only comparison. Whether it does anything on a real page, where people bring their own needs and plans are described in words, is far less certain.
Toggle the eight-class pass and watch how the comparison changes. This is an illustration of the structure, not a prediction of how many people would choose each pass.
Two passes. The choice is a genuine trade-off: spend less now, or pay €60 more for five extra classes. Someone unsure whether they will keep coming has a reasonable case for the smaller pass.
Do this: do not add options nobody should buy. If you want people to see the value of a larger pack, show the per-unit price and say who it suits (“for twice a week”). That is a reference point that helps, and it does not depend on a fragile effect.
The pull of the middle
A related but different effect is the compromise effect. In Itamar Simonson's 1989 paper Choice Based on Reasons: The Case of Attraction and Compromise Effects, an option gained share when it became the middle option between two extremes, not because anything about it was dominated. Simonson linked this to the reasons people can give for a choice: the middle feels safe and defensible.
The compromise effect is the more useful of the two for honest pricing, because it works with real options. A small, a medium and a large plan, each sensible for a different customer, give the undecided buyer a reasonable default. Our tip Why the middle plan wins covers the camera study by Simonson and Tversky, real pricing pages and how to test it, so we will not repeat it here.
The key difference for your page: a compromise option is one somebody genuinely wants; a decoy is one nobody is supposed to want. Build the first kind.
Do this: if you offer three tiers, write one line under each naming who it is for. If you cannot name a real customer for a tier, it is a decoy; remove it or redesign it.
Digits, commas and type size
Do prices ending in 9 work? A little, sometimes, for a specific reason.
In five experiments reported in the 2005 paper Penny Wise and Pound Foolish: The Left-Digit Effect in Price Cognition, Manoj Thomas and Vicki Morwitz showed when a nine-ending price is perceived as noticeably smaller than a price one cent higher. It happens only when the leftmost digit changes, as in $2.99 versus $3.00, and not for $3.59 versus $3.60. It is stronger when the prices being compared are close. And it is not unique to prices: it appears with other multi-digit numbers too.
There is field evidence as well. Eric Anderson and Duncan Simester ran three field experiments with a retailer, published in 2003, in which price endings were manipulated. A $9 ending increased demand in all three. The effect was stronger for new items than for items sold in previous years, and there was some evidence it weakened when “Sale” cues were present. Their reading: $9 endings matter most when customers have little other information.
For a small service business the lesson is modest. €149 instead of €150 may help a little in a close comparison. It can also look like a supermarket trick on a premium service, which is why many studios use round numbers on purpose. Neither choice is wrong. A pricing page that hides its total is wrong.
How the price is written
Formatting matters in subtler ways. In three experiments, Coulter, Choi and Monroe found that adding commas and cents, such as $1,599.85 instead of $1599, can make a price seem larger, because people unconsciously link a longer spoken form, more syllables, with a bigger number. Their 2012 paper is “Comma N' cents in pricing”. An earlier paper by Coulter and Coulter, “Size Does Matter” (2005), reported in three experiments that when a price's numerical magnitude was congruent with another magnitude cue, people judged value higher and were more likely to buy. Practitioner summaries usually describe this as showing a sale price in smaller type; we could not access the full paper to confirm the exact stimuli.
Do this: drop unnecessary cents and use the shortest honest format: “€140”, not “€140.00”. Choose charm or round endings to match your brand, and test only if you have the volume to tell.
The pain of paying
Why do people happily pay €140 upfront for ten classes but wince at €14 every visit?
Drazen Prelec and George Loewenstein's 1998 paper The Red and the Black: Mental Accounting of Savings and Debt offers a model. Paying, they argue, carries an immediate pain that can undermine the pleasure of consuming; their example is the ticking taxi meter that spoils the ride. Two ideas from the paper matter for pricing pages:
- Coupling: how strongly consumption calls payment to mind. Paying per use couples them tightly; a pass or subscription decouples them, so each class feels “already paid for”.
- Prepaying: paying before consumption is buffered by thoughts of the benefits to come, while paying after is not. The model predicts people will often prefer flat-rate pricing even when it costs more for the same use.
In their surveys and a conjoint-style analysis, the model fitted 60% of participants better than a standard discounting model, which fitted 29%. It is a theory with supporting data, not a law of nature, but it explains a lot of everyday behavior: gym memberships, unlimited plans, all-inclusive holidays.
The same logic explains bundling. One price for a package means one payment moment instead of several. For Agnieszka, a pass is not only a discount; it removes the small decision, and the small pain, before every class. The authors also flag the other side: decoupling can make people less aware of what they are spending, which is exactly where consumer law steps in with rules on clear totals and easy cancellation. See Calls to action for the cancellation buttons now required in parts of Europe.
Do this: consider offering a prepaid bundle or subscription alongside pay-per-use, and state clearly what it includes, how long it lasts and how to cancel.
The law on “was” prices
Agnieszka's third suggestion, a big “was €160” next to the ten-class pass, is where pricing psychology meets EU law head-on.
Any announcement of a price reduction must indicate the prior price applied by the trader. The prior price means the lowest price the trader applied during a period of at least 30 days before the reduction. Member states may set different rules for goods that deteriorate or expire quickly, allow a shorter period for products on the market less than 30 days, and treat progressively increasing reductions by reference to the price before the first reduction. The rule has applied since 28 May 2022 and concerns products sold by traders to consumers.
Source: Directive 98/6/EC, consolidated; Directive (EU) 2019/2161, Art. 7. General information, not legal advice; check your own jurisdiction.
The Court of Justice tightened this in 2024. In Case C-330/23, Aldi Süd, judgment of 26 September 2024, a German consumer association challenged an Aldi Süd brochure for 17–22 October 2022. Bananas were advertised at €1.29 with €1.69 struck through and a percentage reduction. Below the price, the brochure stated that the lowest price in the last 30 days was €1.29. Aldi had sold them at €1.29 between 19 and 24 September.
The Court ruled that a price reduction announced as a percentage, or through a promotional statement highlighting an advantageous price, must be calculated from the 30-day lowest prior price. Merely printing the lowest price somewhere for information is not enough. In Aldi's banana case, measured against €1.29, there was no reduction at all.
For Agnieszka, a “was €160” is only lawful if she actually charged €160 as her lowest price throughout the previous 30 days, and any percentage must be measured from that. A permanent price with a permanent fake “was” price is exactly what the rule targets.
Do this: keep a dated log of your prices. Before announcing any discount, check the lowest price you charged in the previous 30 days and calculate the reduction from that.
Show the total price
The last trick on the list is the oldest: show a low headline price and add the rest later. Lawmakers on both sides of the Atlantic have moved against it.
Before a consumer is bound by a distance or off-premises contract, the trader must give the total price of the goods or services inclusive of taxes, plus any delivery charges and other costs, or the fact that such charges may be payable if they cannot be calculated in advance. For subscriptions and open-ended contracts, the total price includes the total costs per billing period. Under the Price Indication Directive, the “selling price” is the final price including VAT and all other taxes. In practice: prices shown to EU consumers must include VAT.
Sources: Directive 2011/83/EU; Directive 98/6/EC. Not legal advice.
For live-event tickets and short-term lodging, a business that shows any price must clearly and conspicuously disclose the total price, and display it more prominently than other pricing information. The total price includes all mandatory fees but may exclude government charges, shipping charges and optional add-ons, which must be disclosed before the consumer pays. Misrepresenting any fee is also prohibited. Other industries are not covered by this rule, though the FTC Act's general ban on deceptive practices still applies.
Source: 16 CFR Part 464; FTC announcement. Not legal advice.
An invitation to purchase omits material information if it leaves out the total price of the product, which includes any fees, taxes, charges or other payments the consumer will necessarily incur. Since 6 April 2025 the Competition and Markets Authority can enforce consumer law directly, with fines of up to 10% of worldwide turnover or £300,000, whichever is higher. Its first fine, announced on 15 April 2026, was £4.2 million against the AA's driving schools, which had left a mandatory £3 booking fee out of the upfront price for more than 80,000 learners.
Sources: DMCC Act 2024, s. 230; CMA announcement. Not legal advice.
Drip pricing
The first price was never a price anyone could pay.
Total price upfront
Same money. No surprise at the end.
Drip pricing also fails on its own terms. It sets a low anchor and then breaks it, which is a reliable way to make people feel cheated at the moment they are deciding whether to trust you. For more on trust at checkout, see Trust signals for small businesses.
Do this: make the first price anyone sees the price they will pay, including VAT for consumers and every mandatory fee. If a cost genuinely cannot be calculated in advance, say so and explain how it will be worked out.
What to change tomorrow
Write who each option is for
One line per plan or pass. Any option with no real customer is a decoy; delete or redesign it.
Show per-unit prices
“€14 per class” is an honest reference point that helps people compare packs without a trick.
Choose your first price deliberately
The first number people see becomes their anchor. Make it an option someone could genuinely choose.
Simplify the digits
Drop unnecessary cents. Choose charm or round endings to fit your brand, not out of habit.
Consider a prepaid bundle
Fewer payment moments can make buying easier. State duration, inclusions and cancellation clearly.
Log your prices before any discount
In the EU, a reduction must be measured from the lowest price of the previous 30 days.
Show the full price first
VAT included for consumers, every mandatory fee included, everywhere a price appears.
Agnieszka kept two passes, added “€14 per class, best if you come twice a week” under the larger one, and skipped the “was” price. She will find out in a few months whether more people choose the ten-class pass. Either way, nobody will feel tricked into it.
What the research supports
Anchoring is one of the most replicated findings in judgment research, though the size of the effect in real purchases varies. The decoy effect is real in controlled, numbers-only comparisons but has proved fragile in large replication efforts and with realistic stimuli. The compromise effect and left-digit effect have solid laboratory support, and $9 endings raised demand in three field experiments with one retailer. Price-format and pain-of-paying findings are plausible and supported, but come from a smaller number of studies. The legal requirements are in force where stated.
Sources
- Tversky, A. & Kahneman, D. (1974). Judgment under Uncertainty: Heuristics and Biases. Science, 185(4157), 1124–1131. Full paper consulted for the wheel-of-fortune procedure and results.
- Huber, J., Payne, J. W. & Puto, C. (1982). Adding Asymmetrically Dominated Alternatives: Violations of Regularity and the Similarity Hypothesis. Journal of Consumer Research, 9(1), 90–98. Abstract consulted.
- Huber, J., Payne, J. W. & Puto, C. P. (2014). Let's Be Honest about the Attraction Effect. Journal of Marketing Research, 51(4), 520–525. Full commentary consulted, including the roughly 2% decoy share.
- Yang, S. & Lynn, M. (2014). More Evidence Challenging the Robustness and Usefulness of the Attraction Effect. Journal of Marketing Research, 51(4), 508–513. Abstract consulted.
- Frederick, S., Lee, L. & Baskin, E. (2014). The Limits of Attraction. Journal of Marketing Research, 51(4), 487–507. Abstract consulted.
- Kaptein, M. C., Van Emden, R. & Iannuzzi, D. (2016). Tracking the decoy: maximizing the decoy effect through sequential experimentation. Palgrave Communications, 2, 16082. Full open-access article consulted.
- Ariely, D. (2008). Are we in control of our own decisions? TED talk transcript, consulted for the Economist example. The book Predictably Irrational (HarperCollins, 2008) was not consulted directly.
- Simonson, I. (1989). Choice Based on Reasons: The Case of Attraction and Compromise Effects. Journal of Consumer Research, 16(2), 158–174. Summarized via the Vantle tip on the middle option.
- Thomas, M. & Morwitz, V. (2005). Penny Wise and Pound Foolish: The Left-Digit Effect in Price Cognition. Journal of Consumer Research, 32(1), 54–64. Abstract consulted.
- Anderson, E. T. & Simester, D. I. (2003). Effects of $9 Price Endings on Retail Sales: Evidence from Field Experiments. Quantitative Marketing and Economics, 1, 93–110. Abstract consulted.
- Coulter, K. S., Choi, P. & Monroe, K. B. (2012). Comma N' cents in pricing: The effects of auditory representation encoding on price magnitude perceptions. Journal of Consumer Psychology, 22(3), 395–407. Abstract consulted.
- Coulter, K. S. & Coulter, R. A. (2005). Size Does Matter: The Effects of Magnitude Representation Congruency on Price Perceptions and Purchase Likelihood. Journal of Consumer Psychology, 15(1), 64–76. Abstract consulted; full text not accessible.
- Prelec, D. & Loewenstein, G. (1998). The Red and the Black: Mental Accounting of Savings and Debt. Marketing Science, 17(1), 4–28. Abstract consulted.
- European Parliament and Council. Directive 98/6/EC on consumer protection in the indication of prices, consolidated version of 28 May 2022. Articles 2(a) and 6a consulted.
- European Parliament and Council (2019). Directive (EU) 2019/2161 (Omnibus Directive). Article 7 on application dates consulted.
- Court of Justice of the EU (2024). Case C-330/23, Verbraucherzentrale Baden-Württemberg v Aldi Süd, judgment of 26 September 2024. Facts and operative part consulted.
- European Parliament and Council (2011). Directive 2011/83/EU on consumer rights, consolidated. Article 6(1)(e) consulted.
- Federal Trade Commission. Rule on Unfair or Deceptive Fees, 16 CFR Part 464 (eCFR text as of 1 October 2026) and press release on the 12 May 2025 effective date. Consulted.
- UK Parliament. Digital Markets, Competition and Consumers Act 2024, section 230. Statutory text consulted.
- Competition and Markets Authority (2026). CMA orders the AA and BSM driving schools to refund learner drivers over drip pricing, 15 April 2026, and How the CMA uses its direct consumer enforcement powers. Consulted for the fine, facts and penalty caps.
Sources checked 18 October 2026. Legal sections are general information, not legal advice; check the rules in your own jurisdiction and with a qualified adviser. The yoga studio, its prices and all mock-ups are fictional; the figures are original illustrations.