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Behavioral Economics Part 1

 

Anchoring – common human tendency to rely too heavily, or “anchor,” on one trait or piece of information when making decisions.

Let’s say go to a restaurant and on the menu there is a steak for $50, but there is also another on for $25. So you think the $25 steak feels right. You weighed your options and made your decision. But your selection was made by the mere existence of a $50 steak. The $50 steak anchors our expectations of what a steak could cost. Let’s look at the wine list. Most times we do not know the wines on the list. We see wines from $25 to $100. You like the $100 bottle but you chose something less expensive. Some restaurants will add a $200 bottle of wine to the list this become the anchor and people will now choose a more expensive bottle and boost sales.

Shaking the anchoring effect is difficult. I know it is hard for me. Put a number in my head and it tends to stick. Try establishing personal anchors in your mind. Maybe $25 is the price of a good theater show, before ordering a $25 bottle of wine ask your self is it worth a show.

Oh by the way $ makes people tend to so ‘oh that is expensive’ and they do not buy. Next time you’re out see if there are $ on the menu.