So, winters are finally here, after months of staying indoor in lockdown you finally step out for some winter shopping, you come across the perfect leather jacket you try it on, click some pictures and got your friends approval, you reach for the price tag and boom! $500 way out of budget! You settle for another jacket that costs you $200 and with tax $300 you walk to the cash counter and the salesperson lets you know that there is sale on previous year’s stock and the first jacket which you chose is now only $300 after taxes. WHICH JACKET WOULD YOU CHOOSE?
Well if you chose the first one you fall into category where majority of the respondents 61.5% to be exact responded in a survey I and my team conducted to test this theory. So, what’s happening here? Ahh, anchoring effect in action. The very first price tag which we saw we used it as a reference point- or an Anchor to compare every other price thereafter. So, if the initial price was higher, we’d feel like it’s a good deal and we’re saving a lot of money but if the initial price was low, we’d feel like it’s a bad deal and not worth it. The survey we conducted proved the same and was in line with the theory of anchoring as explained by Amos Tversky and Daniel Kahneman in a 1974 paper.
Feel silly? Don’t, the anchoring effect is a cognitive bias that influences you to rely too heavily on the first piece of information you receive. Stores use it all the time to convince you to buy, so that you know the power of anchoring effect ask yourself if you giving enough consideration to all information available.
credits: Hrithik, Alvin, Raj, Navaneeth