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Price Anchoring, Or Why a $499 iPad Seems Inexpensive

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Re: Price Anchoring, Or Why a $499 iPad Seems Inexpensive

#71
post #41

Earlier quoted context omitted.

Because most people want to look reasonable at a job interview. However, one thing people miss is that the anchoring can be to any number whatsoever, so you don't even need to talk about what you want per hour. I remember a paper that asked participants to note down the last two digits of their social security, and subjects anchored themselves to that (statistically significantly- one of the authors was Dan Ariely).…

I remember a paper that asked participants to note down the last two digits of their social security, and subjects anchored themselves to that (statistically significantly- one of the authors was Dan Ariely). Do you have a link? I am very skeptical that merely tossing out large-sounding numbers during an interview would have any influence on your likely salary range. In situations like that, your potential employer u…

Here you go: http://www.cepr.org/meets/wkcn/3/3509/Papers/Ariely.pdf

Btw, note that initial anchors grossly affect the decision; subsequent anchors are less effective. So, if the interviewer already has a figure in mind (or worse, has written it down), then you really have a lower chance of swaying the number. "making a fairly strong suggestion" may not move the anchor much.

However, if neither knows a reasonable number, then any anchoring is significant (including numbers not pre-pended with a dollar sign- Kahnenann's 1974 paper).

Re: Price Anchoring, Or Why a $499 iPad Seems Inexpensive

#72
post #45

Earlier quoted context omitted.

Because most people want to look reasonable at a job interview. However, one thing people miss is that the anchoring can be to any number whatsoever, so you don't even need to talk about what you want per hour. I remember a paper that asked participants to note down the last two digits of their social security, and subjects anchored themselves to that (statistically significantly- one of the authors was Dan Ariely).…

It wasn't just naming a large number: It was taking a random number (last 2 social security digits), writing it down with a $ in front, compare it as price to certain products, and THEN bidding on them. Not just naming a big number. It's in one of his 2 TED talks, which both are great to watch.

Similar effects have been seen for non-dollar figures: people anchor to numbers on Wheel of Fortune, for instance (Kahneman's 1974 paper).

However, this anchoring is definitely weaker, so your point is taken.

Re: Price Anchoring, Or Why a $499 iPad Seems Inexpensive

#74

Earlier quoted context omitted.

I agree with you that it seems like there should be an upper limit. But if this article is correct about there not being a rebounding effect, then asking for an extravagant amount seems like your best move. Although I'm guessing that things are a bit different if they haven't indicated whether they plan to hire you or not, i.e. if this is something discussed in a screening interview, asking for an exorbitant salary w…

You make good points. But I think the difference is that juries have an absolute duty to try to be just. I think a lawyer is extremely unlikely to loose a case by trying to ask for too much money. On the other hand, a job candidate can loose the entire offer. If someone asks for a few grand more than what I was thinking, I think we can work something out and start negotiating. If someone asks for more than twice what…

The other difference is that the jury is spending other people's money

Re: Price Anchoring, Or Why a $499 iPad Seems Inexpensive

#75
post #62
post #26

Earlier quoted context omitted.

I read on here few months ago that naming your own price first is better. Now I believe it! Recently we hired a sales person on PT basis. At the interview, she gave her expected salary to be about 2.5 times what I had thought about paying her. Now, I know about this notion of anchoring and yet I felt kind of embarrassed to make my initial offer. I fought off the urge to buy into her frame and ultimately made a decent…

To add to this, my Dad also uses this with car sales people. 1. He picks the absolute bottom price. 2. Calls up the area dealerships within 50 miles 3. Tells them the model, price and his phone number to call back when they are ready to give him at his price He totally shuts off any attempts by the sales people to erase my Dad's first number with their own by insisting he does not care about any extra features and ot…

How low is his lowest price usually under normal price?

Re: Price Anchoring, Or Why a $499 iPad Seems Inexpensive

#77
post #49

Earlier quoted context omitted.

I don't know if you'd want to make it extremely clear that the employer is your first choice and you would like to negotiate your salary to a lower point. It seems like you'd want the exact opposite of that.

Yeah, if I thought I was worth $100k (and that they were going to offer me that), my aggressive # might be $150k or $200k. It's unlikely that they'd say, "Well gosh-- he really likes us, so let's offer him $80k". There's also a lot of powerful psychology about saying that you really want to work with them rather than playing hard to get. By saying, "you're my favorite!" (truth or not), you're establishing with them (…

It's unlikely that they'd say, "Well gosh-- he really likes us, so let's offer him $80k".

But that is exactly what Google does actually do. Not on an individual basis mind, but as a general HR policy.

Re: Price Anchoring, Or Why a $499 iPad Seems Inexpensive

#78
post #55
post #44

Earlier quoted context omitted.

It really drives me crazy when I'm discussing products with a salesperson and they consistently "correct" me every time I mention the rounded-up price. It goes like this: Sales: So it looks like the $299 point-and-shoot might match the features you're looking for, moreso than this $399 video camera. Me: OK. I'm really leaning towards the $300 one. Sales: $299. Me: Yeah, sure. Because I don't know if I'm really going…

Is that really something you experienced? That didn’t ever happen to me. If a salesperson treated me like that I would pretty much immediately lose all respect for them.

That's what they've been told to do, it's not their fault. It's like if you go into a Pepsi venue and ask for a coke, they will always say "Pepsi". Now I just want some sort of cola-flavoured beverage, I'm not that fussed, and they know that, but I don't think "this person is such a pedant" or think I'm being disrespected.

Re: Price Anchoring, Or Why a $499 iPad Seems Inexpensive

#79
post #64

Dan Ariely gives a related TED talk: "Are we in control of our own decisions?" http://www.ted.com/talks/dan_ariely_asks_are_we_in_control_o... Look around 11:30 for a few examples of how comparing options affects us more than looking at each individually. On a side note, it also seems inexpensive because it's $499 and not $500! Psychological pricing is one of my larger pet peeves...

This doesn't bother me as much as the movie-popcorn pricing system, which seems to be rapidly spreading to everything (Cold Stone and Jamba Juice are two particularly egregious offenders). You can have the miniscule size for $5, the "medium" size for $5.75, or the insanely large size for $6.95. Of course they never even expected to sell the other two sizes, they're only there to make the medium size (which is still w…

By the large one and share it.

Re: Price Anchoring, Or Why a $499 iPad Seems Inexpensive

#80
post #29

Earlier quoted context omitted.

This is going to be a killer with the iPad. I managed to avoid pre-ordering one, but as the app library grows and the iPad's potential use cases multiply, that $499 will start to look like an increasingly better deal.

Though the apps are at $9.99+ on iPad. With the "anchoring" of the iPhone apps at $0.99 and $2.99 (and free), Apple and other companies are having to fight a slightly different battle of re-anchoring everyone higher.

I don't expect those prices to stay up at $9.99 for long though. That's just an artifact of there being relatively few iPad-only apps right now. That'll change soon & competition will drive prices down.
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