Explain how the example from the lecture illustrates the use of the compromise effect.

How Businesses Use the Compromise Effect

When purchasing a particular product, consumers are often faced with different choices that range from high to low in price and quality. Many consumers have a natural tendency to avoid extreme options, favoring instead products that are at the middle level of price and quality. This is known as the compromise effect. Companies can take advantage of the compromise effect when they sell their products to consumers.

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听力原文

Okay, so, for example, there’s a company that makes kitchen product that recently did this. One of the types of items the company makes is coffee makers; small coffee makers for people’s kitchens. And originally the company had only two models of coffee makers, a cheap low-priced model and then your average everyday model that was sturdier and better made. Now the problem was that the company wasn’t selling any of its everyday average coffee makers - more people were buying the cheap coffee maker. So what the company did was they added a third body of coffee maker. A fancy coffee maker. It was much fancier. There was a lot more features than the cheap everyday coffee maker. And of course, it cost a lot more too. So now, the company had three coffee makers on the market. A cheap model, the average everyday model, and now the fancy model, so customers had three choices. And what happened is, after the company added the fancy high-priced coffee maker, the sales of its average everyday model went up. Now, most people started buying this coffee maker, which wasn’t true before.

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Explain how the example from the lecture illustrates the use of the compromise effect.

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The passage introduces a term called compromise effect. Compromise effect means customers are inclined to choose the products of medium price and quality instead of extreme ones. The audio then represents us an example of this concept. A company which makes coffee maker initially has just two types of machines. One is cheap. Also its quality is not good. The other kind has average quality and price. Later, this company invents a third coffee maker which is the most expensive among the three coffee makers. The appearance this kind of expensive machine makes more and more people begin to buy the average coffee maker. This is the application of compromise effect.

Explain how the example from the lecture illustrates the use of the compromise effect.

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