Anchors in Estimation and Retail Environments

Operations, Information, & Decisions Department; Faculty Adviser: Joseph Simmons

I examine how numerical anchors inform retail decisions. For example, consumer decisions about whether or not to buy a good depend on whether they adjust upwards or downwards from the price when they decide how much the good is worth to them. Although the price acts as an anchor when people assess the good’s worth, it is the direction of adjustment, not the extent of adjustment from the price that is key to the purchase decision. From a price setter’s perspective, my work on anchoring and extremeness aversion suggests that price setters will be reluctant to adjust prices of high value goods too far from the prices of middle range goods. This means they often fail to exploit the potential for a higher price to anchor consumer valuations.