This refers to the phenomenon where people think something has more value than it actually has just because it costs a lot of money.

 

An experiment has been done where people have been offered wine. The first time the people were told that wine cost $50, the second time that is costs $500.

After tasting the wine, researchers asked the participants what wine tasted better.

 

As you probably can guess, it was the wine for $500.

BUT what the reaserchers didn’t tell the participants was that it was the SAME wine all along. That’s interesting isn’t it?

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This psychological principle called anchoring was discovered by Amos Tversky and Daniel Kahneman. These two researchers found that people tend to make judgements by using relative distances from anchor points.

In their study, participants were asked to compute, the product of the numbers one through eight, either as 1 x 2 x 3 x 4 x 5 x 6 x 7 x 8 or as 8 x 7 x 6 x 5 x 4 x 3 x 2 x 1 within 5 seconds. Because participants did not have enough time to calculate the full answer, they had to make an estimate after their first few multiplications. When the sequence started with small numbers, the median estimate was 512, when the sequence started with the larger numbers, the median estimate was 2 250.

This is used in sales where, say you are buying an expensive suit for $10 000, at the checkout they offer you shoes for $500. You’ll be more inclined to buy those shoes than if you were buying a T-Shirt for $50 instead of a suit because it doesn’t seem that much money in comparison.

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