First demonstrated experimentally by Joel Huber, John Payne, and Christopher Puto in 1982. The most famous case, via Dan Ariely's "Predictably Irrational" (2008), is The Economist's subscription tiers: web-only $59, print-only $125, print+web $125. Nobody picks print-only — but its mere presence sharply increases how many people pick print+web. Print-only is the decoy.
The decoy works through relative comparison, not absolute value — next to print-only, print+web looks like getting the web edition free at the same price. Alone, choosing between $59 and $125 was ambiguous; the decoy makes it obvious.
Adding a decoy tier is common pricing strategy on its own, but making it literally unpurchasable or listing an option that doesn't really exist crosses into dark-pattern territory.
The demo highlights the middle (decoy) card first, then shifts emphasis to the bundle on the right as the "obvious" pick.
When to use
Use this when building a three-tier pricing table. Check whether the middle option is a real product you'd sell, or exists purely as a comparison anchor.