Actually, that does work! I forget the precise names (this is studied in Behavioral Economics), but there are a number of cognitive biases which cause people t

Actually, that does work! I forget the precise names (this is studied in Behavioral Economics), but there are a number of cognitive biases which cause people to wrongly evaluate their decisions. For example, say you have two choices A and B. Imagine they have different characteristics along 2 dimensions X and Y. Imagine A is higher along dimension X, while B is higher along dimension Y. Now, suppose that looking at A and B, you would choose A. Add a third choice C which is more strongly along dimension Y than A or B. Now, you have a choice A which is strongly along X, choice C which is strongly along Y, and choice B which is a little X and a little Y. Also, you don't really like or care about C. These results were shown with numerous experiments: presented with choices A, B, and C, you will often choose B. Notice that before, without the irrelevant alternative C, you chose A. But add in a choice that you don't even care about, you prefer B. Rationally, that shouldn't happen, and economists try their best to explain that but fail. As for having a super-high priced item, that makes sense for a number of reasons. For example, one reason may be the halo effect (http://en.wikipedia.org/wiki/Halo_effect http://en.wikipedia.org/wiki/Halo_effect). Just the existence of a very high-priced, very high-value item can make people perceive your brand to generally be of a higher quality. Also, some behavioral economists (e.g. Benabou) postulate that people have "identities" for themselves which they refer to when making consumption decisions. So, someone might think of themselves as the frugal buyer, and so they will always go for the cheapest alternative which gets the job done. A lot of people probably think of themselves as the middle-of-the-road average person. So if you make an super-double-over-priced option, then more people will buy the over-priced option because they perceive it to be more average. Plus, some of the people who consider themselves to be big spenders will buy the super-double-over-priced option anyway!