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.
MORE IDEAS FROM The science behind our bargain hunting foolishness
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:
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.
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.
It is a marketing tactic used to nudge you into purchasing a higher-priced variant of a product or service.
The Decoy effect can be applied in recruitment, polls, elections, or anywhere else where there is a choice involved.
Cognitive Biases are a collection of faulty and illogical ways of thinking which are hardwired in the brain, most of which we aren’t aware of.
The idea of cognitive biases was invented in the 1970s by two social scientists Amos Tversky and Daniel Kahneman, with Kahneman winning the 2002 Nobel Prize in Economics for the same.
We’re not nearly as rational as we like to believe. When we face an uncertain situation, we fail to evaluate the information or to look up relevant statistics carefully.
Instead, we depend on our mental shortcuts which may lead us to make rash decisions.
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