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The Anchoring Effect
Consumers often measure whether they got a good deal on a purchase by the difference between the original price and a sales price. The bigger the difference is, the better the deal feels. The original price a consumer is exposed to becomes a reference point, or an anchor. The April 2021 issue of Page One Economics: Focus on Finance explains the anchoring effect and the role it plays in the decision making process when it comes to what consumers are willing to pay for a good or service.