We run an incentivized choice process experiment along the lines of Caplin et al (2011) to assess the robustness and nature of the Asymmetric Dominance Effect (ADE, Huber et al., 1982), the most prominent example of context effects. According to the ADE, adding a dominated option to a choice set increases the choice share of the newly dominant option at the expense of other options. While widely replicated, the ADE is usually found in hypothetical or payoff-irrelevant situations, and without considering the choice process. We systematically vary the utility difference of the options and track the choice process in real time.

We use an expenditure minimization task. Subjects are given a budget to buy three (fictitious) liters of gasoline and keep what they do not spend. We split price per liter into two different dimensions (quantity and price per such quantity), so that subjects have to estimate unit prices.

We vary across decision tasks the relative price of the target (the dominant option) to the competitor (the non-comparable other option) keeping fixed the premium of the target with respect to the decoy (the dominated option). This allows us to assess the importance of the ADE away from indifference and to measure the cost sustained by each subject in following the ADE.

Subjects face each choice for a given time and are free to change their mind during this time. We keep track of all the provisional choices. Once the time has ran out, we draw a random uniform moment and the item chosen at that moment is binding. If no choice had been made, then an item is chosen at random. Subjects are incentivized to give a fast reply and then reconsider.

We find that the ADE is a transitory phenomenon, that disappears when subject are given enough time and incentives to ponder their choices. The ADE emerges for the most part only in the early stages of the choice process. Consumers provisionally choose the asymmetrically dominant option to avoid the dominated decoy and then progressively switch until choice shares come to correspond to price differences only.

We also allow subjects to differ by types. We define four types of decision-makers: pure price (P), who disregard dominance and decide based on price estimates only; pure heuristic (H), who exploit dominance irrespective of prices; heuristic then price (HP), who first use dominance then adjust based on prices; and random (R).

We estimate the proportion of each type with a mixture model. 50% of our participants are HP, 18% are P, 26% are H, and less than 2% are random.

Our results show that the ADE consistently affects only a subset of subjects, while for most others it disappears given time and incentives. Its importance in the applied literature and popular press seems in light of our results to have been exaggerated.