The Anchoring Effect Concept

This research will talk about something that occurs, all over the United States, even on a large scale all around the world. Price gouging, this occurs when sellers of a good increase their prices dramatically, beyond the price level it was normally purchased at due to some sort of incident that has happened. Mostly, like a natural disaster. (Zwolinski)

This based on customer pricing method. It relies on consumer 's emotive responses, subjective views and feeling towards specific purchases.

Changes in price can affect buyers' purchasing decisions; this effect is called the income effect.

Companies can choose many ways to set prices, skimming price strategy where a company sets a higher price than normal and a penetrating price where low initial price is set. “Pricing

It is basic economic principle that states that when there is an oversupply of a good or service, prices fall. When there is a high demand, prices tend to rise.

Consumers determine how much price affects their decision making. The more responsive to price consumers are, the larger the number of price elasticity they have. In the Atlantis simulation both the GoodLife and the consumer had a higher percentage of price

As a consumer, we all get frustrated when we think a listed price is “too high” whether it is a necessity, and we have to buy it, or we just really want it. Some of the largest complaints by consumers today are directed towards the cost of goods. Marketing research has shown us that the costs of some items are being intentionally raised based on aspects of the individual who is making the purchase. The manipulation of prices can be broken down into three main issues: price fixing, price gouging, and price discrimination. Are there any positive or beneficial reasons to do this? Yes and no, the following paragraphs provide information about each practice individually.

First of all let me explain why people like to buy a items/goods those are higher in price’s. Those who are purchasing the target brand items are making a selection, spending only a few seconds before moving on. This leads me to suggest that consumers are not paying much attention to prices. On the other hand, we know from scanner data that consumers respond a great deal to price changes. It appears that rather than looking at prices per see on every shopping occasion, consumers may check prices only periodically (say, every ten shopping times) or rely on cues in the environment—e.g., buy whatever brand is on sale. Other, thing which I realized is that different people live in a different

| b. pressure on you by your salespersons to lower the price so that they can boost their sales

Consumers can adjust to price changes by purchasing less of an item whose price has risen and more of a cheaper substitute.

In one example, Harford describes a situation in which a university attempts to discourage drunkenness by raising the price paid to drink any amount of alcohol. Counterintuitively, many would continue drinking and “Later in the evening, many of them would empty the contents of their stomachs”(78). It would make sense if one sees that the students who paid the up-front fees would want to get the best deal for their money by consuming more alcohol. This same principle can then be applied to driving and plenty of other scenarios to support higher marginal prices to provide incentives for minimizing a particular unwanted

As a consumer, knowledge of the various market structures allows for the understanding of the motivations and decisions made by certain firms, and can assist in the making of calculated purchases. For instance, the student in the video hypothesized that gas prices were rising because multiple gas firms within an oligopoly were colluding and artificially raising prices. With this information, one can choose to take their purchase to another firm who does not appear to be colluding and purchase a substitute good for a cheaper price. If enough consumers are aware of the strategies utilized by firms within markets structures such as monopolies and oligopolies, action can be taken in order to prevent costs of goods from reaching levels that only benefit producers. The power that each consumer’s purchase holds is often underestimated, and if used wisely, can help to create a market that fosters innovation and rewards firms with fair prices.

The ‘better-than-average’ (or BTAE) effect states that certain individuals would evaluate themselves more positively than the average person. Within this, there is argument to suggest that there are both positive and negative implications linked to this theory. The concept of ‘self’ plays a large role in discovering whether these factors affect the individual, whereas social comparison is also a great aspect in understanding how the better-than-average effect can include itself into everyday society, therefore creating an unrealistic divide between different groups.

The concept evolves into various sub-concepts, which helps economists and producers understand the possible impact, of certain decision. For instance, own-price elasticity can be used to forecast the possible impact, on demand, with the increase or decrease in price. Therefore, by using this method, a seller can estimate future revenue, after taking a particular decision, regarding price.

Quite often, consumers purchase goods and services based on their perceived need. Upon making the decision that a need is present and a solution is available consumers are more equipped to react to that need. Although previously perceived that consumers will normally accept prices as presented by suppliers that remains to not be the case. Consumers assess and process prices based on past purchases and other psychological process they went through previously such as persuasive marketing strategies, accessibility of the goods or services and possibly information gathered from prior purchasers of a product. There are countless options that are available to consumers. Consumers are then faced with the choice of choosing the product that best fulfills their need at that given point. Consumers who are knowledgeable regarding prices will be aware of the approximated price for products (Zhao, Zhao & Deng, 2015).