DECOY BIAS EFFECT: The Asymmetric Dominance Effect of Choice Manipulation

Posted on April 19, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

A Concept All Financial Advisors, Planners and Insurance Sales Agents Should Know

SPONSOR: http://www.CertifiedMedicalPlanner.org

By Staff Reporters

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Decoy Bias Effect is a dubious phenomenon in decision-making where the introduction of a third, less attractive option (the “decoy”) influences individuals to change their preference between two other options.

The decoy bias effect describes how, when we are choosing between two alternatives, the addition of a third, less attractive option (the decoy) can influence our perception of the original two choices. Decoys are “asymmetrically dominated:” they are completely inferior to one option (the target) but only partially inferior to the other (the competitor). For this reason, the decoy effect is sometimes called the “asymmetric dominance effect.”

EXAMPLE: This bias is commonly used in financial planning sales; as well as marketing and mutual fund, ETF, REIT, stock broker, insurance agent and financial advisor pricing strategies to manipulate investor choices.

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MENTALITY: Mob and Herd … and More!

Posted on December 5, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

MODERN DAY SOCIAL INFLUENCERS

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Mob Mentality can occur in unfamiliar groups, social cues disappear, and behavior becomes influenced by the crowd. Mob mentality shows how people sometimes act in ways they wouldn’t alone, following the group’s lead. According to colleague Dan Ariely PhD, this effect can create a loss of personal accountability, leading to behavior that may not align with personal values.

Herd mentality is the tendency for people’s behavior or beliefs to conform to those of the group they belong to. The concept of herd mentality has been studied and analyzed from different perspectives, including biology, psychology and sociology. This psychological phenomenon can have profound impacts on human behavior.

QUESTION: What about social media sites and modern influencers today! So-called celebrity endorsements and political elections, too?

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BIAS: Of “Social Proof” and Influencers

Posted on November 15, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

INVESTING DEFINITION

By Dr. David Edward Marcinko MBA MEd

SPONSOR: http://www.MarcinkoAssociates.com

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Social Proof is a subtle but powerful reality that having others agree with a decision one makes, gives that person more conviction in the decision, and having others disagree decreases one’s confidence in that decision. 

This bias is even more exaggerated when the other parties providing the validating/questioning opinions are perceived to be experts in a relevant field, or are authority figures, like doctors, attorneys, financial advisors, teachers and/or people on television.  In many ways, the short term moves in the stock market are the ultimate expression of social proof – the price of a stock one owns going up is proof that a lot of other people agree with the decision to buy, and a dropping stock price means a stock should be sold. 

According to colleague Dan Ariely PhD, when these stressors become extreme, it is of paramount importance that all participants in the financial planning and investing process have a clear understanding of what the long-term goals are, and what processes are in place to monitor the progress towards these goals. 

Without these mechanisms it is very hard to resist the enormous pressure to follow the crowd; think social media and related influences.

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PUMPERS & DUMPERS: Social Media Influencers Charged in Scheme

Posted on December 16, 2022 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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DEFINITION: Pump and dump (P&D) is a form of securities fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price. Once the operators of the scheme “dump” (sell) their overvalued shares, the price falls and investors lose their money. This is most common with small-cap cryptocurrencies and very small corporations/companies, i.e. “microcaps“.

CITE: https://www.r2library.com/Resource/Title/082610254

While fraudsters in the past relied on cold calls, the Internet now offers a cheaper and easier way of reaching large numbers of potential investors through spam email, investment research websites, social media, and misinformation.

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And so, Federal prosecutors and the SEC have accused seven popular Twitter and Discord users of wielding social media to manipulate stock prices—pumping the shares and then selling off mass quantities for profit once they rose.

An additional defendant, whose Twitter handle was @DipDeity, was charged with aiding and abetting the alleged fraud for hosting a podcast that featured and promoted the seven influencers as skilled traders to follow.

Each influencer charged had well over 100,000 followers and, according to the SEC, the group earned about $100 million total in the scheme.

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ORDER: https://www.routledge.com/Comprehensive-Financial-Planning-Strategies-for-Doctors-and-Advisors-Best/Marcinko-Hetico/p/book/9781482240283

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