behavioral economics

(15%)
Suppose you are trying to market a smartphone called M, and your main competitor sells
a smartphone called N. They differ along two attributes: battery life and processing speed.
Comparing to N, your product M has a longer battery life but a slower processing speed.
Suppose there is a consumer who currently prefers N to M. You want to manipulate the
consumer’s choice by introducing a new product D, which will act as a decoy for M.

Draw a graph with battery life on the x-axis and processing speed on the y-axis.

Mark the locations of smartphones M and N.

Use solid lines to represent the current indifference curves of the consumer before the
introduction of a decoy.

Use a “D” to mark the area where the decoy should locate. Explain why.

Use dashed lines to show what the voter’s indifference curves would look like if the
introduction of the decoy had the intended effect.