Crossroads Chronicles

A look at price anchoring, how it shapes our perception of value, and influences what we choose

Imagine walking into a mobile shop to purchase your new addiction. You finalise two options. Option 1: Excellent camera, but a decent battery, at the price of 50k. Option 2: Good camera, but an all powerful, will save you from getting up and going to plug in every other hour battery, at a lower price of 35k. You are torn between the two options and cannot make a decision. The shopkeeper now sees your distress and as he’s late for his nephew’s birthday dinner, he wants to get rid of you quick. He brings forward a third option. Option 3: Excellent camera, but a poor battery, with the same price as Option 1. Now you finally see that Option 1 is the clear winner and complete the purchase.

What just happened? To compare things effectively, there should be some common ground that helps make the comparison easier. Between the camera, price, and the battery, the comparison seemed somewhat random at first. But when a third option appeared with similar parameters A (camera) and C (price) but a poor parameter B (battery), the first option with the better battery became the best option. This is the decoy effect in action. When a decoy option is present, we tend to make decisions based less on which option best suits our purposes and more on what feels like the most advantageous choice. When we usually evaluate products, we are looking at these through two major lenses: quality and price. We do tend to prefer better quality and higher price, and companies exploit this behaviour to push their more expensive targets, strategically placing competitor products and decoys. Consumers go home thinking they made the rational decision, but in reality, it was completely manipulated!

Once you are reeled into the 50k phone, it also sets off the anchor effect. You are likely to judge all future phones against this price. Your perceived notion has now shifted as you were not actually considering the 50k phone, but you were nudged to buy this. The price was initially arbitrary, but now you will use this as reference value whenever you wish to purchase a phone or recommend phones to your family or friends. This is when it becomes coherent. This is what economists refer to as arbitrary coherence. The initial price (arbitrary) becomes a reference you continue to use (coherence), even if it was influenced by a biased choice. Your sense of value didn’t come from reason. It came from a manipulated comparison – and it stuck.

Price anchoring is everywhere. Literally. When there is a new product launch and it does not do well, sellers introduce a cheaper version (or reverse anchoring) to kickstart sales. You see it when you spot sale signs hanging over store windows, with the X crossed-out price followed by a Y “limited time only” offer. That anchor shapes what you think is reasonable, making Y feel like a bargain (even if it was the intended price all along!) The seller wins because the discounted price still turns a profit, and you walk away feeling smart, unfortunately. Seller: 1, Buyer: 0.

At the heart of this is the fact that people rarely evaluate prices in isolation. We rely on reference points. If you are first shown a 10k product, a 5k alternative feels affordable. But reverse the order, and 10k suddenly seems steep. Anchoring sets that reference point and directs your decisions. This also shapes how we perceive brands over time. A company that consistently shows higher prices establishes itself as premium in our minds. On the flip side, leading with low-price anchors signals affordability and attracts price-sensitive buyers. Over time, this positions the brand in a certain way, not actually because of quality differences, but because the pricing structure set the tone.

To avoid falling into the anchor trap, consumers should identify what they actually want, and recognise that marketing strategies often employ these tactics to influence decisions. Anchoring doesn’t just influence one purchase; it can define how we see value for years to come. So, be mindful during purchases and keep your needs in focus. Gear up for your next shopping trip and if something feels like a no-brainer, pause for a second. You might not have chosen it; your brain might have been quietly anchored to it.