Krugman analysis Harvard Case Solution & Analysis

Krugman analysis Case Solution

Anchoring bias

Anchoring bias is a common human nature to rely significantly on the information that he has received initially while making the decision. People are often too tied on the first piece of information they get and heavily rely on that information while making the decision. The Values that once imprints in the minds of the individuals are often used by them as a reference point while making decisions.

I find it most interesting because it carries a high weightage in the decision making process, as it affects the emotions and influences the economic choices of an individual. It contains a priming effect i.e. when a person is initially exposed to any information or figures, it serves as a reference point and highly affects the decision and the judgment of the individual regarding the value of that particular thing.

Anchoring affects the decisions without any known intentions or awareness which is reflected through an individual behavioral pattern. The manufacturers and sellers often use this tool to influence the buyers to behave in a certain manner or pattern. It can be well understood by taking a real example of how this works: consider that a person wants to buy a house, the first house shown to him by the real state person will serve as an anchor and will affect his perception about the houses subsequently shown to him later regardless of them being expensive or cheap.

It is interesting to know that how anchor can highly influence someone’s decision as they are difficult to avoid and through it we can analyze the tactics used by various sellers to sell their products in the market at their targeted price through anchoring affect because the individuals always set the initial price told to them as a standard for the rest of the negotiations. The best example so far being used in the market is the sales, the major market players have been using this tactic from the decades to increase their sales and to attract the customers..........


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