Nothing has an absolute price — only a relative one

Ariely opens with the principle of relativity: we almost never evaluate an option in isolation, only in comparison to nearby alternatives, which means adding a strategically bad option can make a mediocre one look great. His signature example is a real subscription offer from The Economist: web-only access for $59, print-only for $125, or print-plus-web also for $125. Nobody sensible chooses print-only when the combo costs the same, so it exists purely as a decoy — and sure enough, when Ariely tested it on students, adding that 'useless' middle option shifted overwhelming preference toward the pricier combo, compared to when the decoy was removed entirely.

He extends this to house-hunting, where realtors show a similarly overpriced, undesirable listing purely to make the real target property look better by contrast, and to salary comparisons, where we judge our own pay less by its absolute value than by how it stacks against a colleague's.

Takeaway: before comparing two options, ask whether a third one was placed there just to bias the comparison.