The One Liner

Learn Influence of Anchoring Effect on Decision Making

Shreedevi Kulkarni
August 10, 2022

Learn Influence of Anchoring Effect on Decision Making

People frequently use the first piece of information that is available (the anchor) as a reference when trying to make a decision. According to psychologists, people tend to depend excessively on the very first piece of information they learn, which might have a significant impact on the choice they ultimately make. Once people have an Anchor or first piece of information, they try to make judgments by adjusting this anchor and there will be a bias or an error while interpreting the information.

For Example: If you see a clock that is priced at 10,000 Rs and then see the same clock discounted at 5000 Rs, you are more likely to buy the clock at discounted prize considering it as cheap. Whereas, if the clock was initially placed at 5000 Rs, you would not view it as cheap.

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How does Anchoring Effect Influence Everyday Decisions

Learn Influence of Anchoring Effect on Decision Making

1. Displaying Original higher prize and discounted lower price next to each other

Very often when we are shopping online, or during a sale, we come across pricing with discounted price next to it. People often depend on the price of the product to determine it’s worth. We assume that expensive products will be of excellent quality,  durable, fashionable and hence tempted to buy, and when we see that expensive product is on sale, people rush to buy the product.  

Example: Consider yourself shopping online, you might have liked a shirt which is $100, far exceeding your budget. You’ll save that shirt on you wish-list and after few days, the same dress you’ll see at discounted price of $80 and you are more likely to buy the shirt now, even though it’s still exceeding your budget.

2. Different pricing for wholesale and retail products

Many brands and shops often keeps discounts for the products that are bought in large quantities. The key goal is to convince people to focus on the financial benefit. People are persuaded to purchase additional units even though they are not necessary because it makes the deal alluring. For   years, the biggest supermarket chains have profited from this.


The shop might give an advertisement that, if you buy 1 coffee mug, it would cost $5, but if you buy 3 Coffee mug, instead of $15, it will only cost $10. People often gets influenced by the second offer and tends to buy 3 coffee mugs even though they don’t need them.

Learn Influence of Anchoring Effect on Decision Making

Cognitive Basis that Influence our Decision Making

1. The Bandwagon Effect

In an experiment, it was discovered that out of a group of 5 students, the first 4 provided the same response. However, it was also discovered that the fifth student, who was initially planning to provide a different response, ended up providing the same response, whether it was correct or incorrect.

The “Bandwagon Effect,” which depicts people’s inclination to act in a specific way solely because others are acting in that way, whether or not they agree, is what psychologists refer to in this situation. Very frequently people get influenced by fashion trends and other decision making because of this effect.

Example: When you want to go out for dining, you mostly decide the restaurant based on the popularity and reviews which may be over-hyped.

The framing effect is a bias where people make decisions based on the information; it doesn’t matter if it is loss or gain.

Generally, people risk things when the option is more negative than positive because losing something puts us under more pressure than the happiness of gaining something. 

Hence many brands use this psychological tactic to make money.

Example: When shopping online, you might have come across the captions that state, “Only one piece available,” “Hurry, only a few pieces left,” etc. Amazon also follows similar kinds of marketing gimmicks, even Myntra and everyone. These types of framing will create urgency among customers, and they are more likely to buy the product quickly.

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Learn Influence of Anchoring Effect on Decision Making
Learn Influence of Anchoring Effect on Decision Making

Final Thoughts

Anchoring has a lot to do with our decision-making. It gives us an insight into how individuals can change their decision based on the general preferences or collective ideology of people around them and how it influences their resolution.

Many are doing it, and we are still getting influenced. So what should we do?

Shreedevi Kulkarni

Shreedevi Kulkarni is a counseling psychologist with expertise in adolescent counseling, child counseling, and skills training. She has experience as a Psychology lecturer and believes in empowering her students through experiential learning.

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