Cognitive Biases: Anchoring And Our Relationships With Buying Stuff

When we walk into a store and see an Ultra HD Television costing upwards of $40,000, we usually feel as if it’s a complete waste of money and start to look at the other bargain options in the $1500 range. While we may think we are smart shoppers, we have been manipulated.

Anchoring is a cognitive bias where the initial figure that is provided to our minds distorts our thinking and influences our subsequent buying decision. The $1500 TV wouldn’t look so enticing and cheap if we didn’t see the expensive one before. In fact, if the first TV we saw was for $500, then the $1500 TV would look expensive.

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The science behind our bargain hunting foolishness

theconversation.com

Many psychological findings are hard to replicate, but anchoring is easy to demonstrate and repeat.

Court judgements are routinely influenced by anchors, where initial numbers play a subconscious role in the judge’s mind. Salary negotiations are affected by the starting position, so it is always important to make the initial offer.

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Everyone is using the anchoring effect. Even when we try to sell a car, we initially put a price much higher than what we plan to get from it.

The most common example is when during online and offline sales, we see that the earlier, inflated price has a big red cross over it, and the new, seemingly cheaper price is highlighted just next to that.

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Anchoring is an extremely strong bias, and even if we are aware of it, it still works. We can follow certain rules to avoid this highly prevalent and effective cognitive bias as much as possible:

  1. Be aware of the anchor effect and recognize that our need for a bargain and even our mood can make us fall for it.
  2. Have as much information you can get about the product and the possible price range before making a large purchase.
  3. Have preset limits on spending, so that you don’t go above it.

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