Tag Archives: behavioral economics

On ”Anchor Prices”

From The Simple Dollar:

I have a quick four question quiz for you to run through in your head. Just give your snap response to these – don’t think about each one too much.

What is a wedding supposed to cost?
What is an automobile supposed to cost?
What is a home supposed to cost?
What is a three week vacation for a family of four supposed to cost?

For each of these questions, you came up with a number of some sort. That number is based on your own life experience coupled with what you’ve observed others doing and also the influence that media has had on you. That number, in other words, is your “mental anchor” for what that item should cost – and it’s often the basis of judging whether something is reasonable in price or not.

Of course, anyone who has read The Simple Dollar for long probably recognizes one thing immediately: that anchor price is nothing more than a sticker on the box. It doesn’t represent what you’d ever actually need to or have to pay.

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Smart People and Silly Superstitions

From Manhattan Project: The Untold Story of the Making of the Atomic Bomb by Stephane Groueff, Chapter 42, pg. 274:

…To raise the quality extraordinary measures were taken at the Nash Building to assure conditions of maximum cleanliness during fabrication. In order ro avoid even the slightest presence of organic materials, the girls engaged in the processing not only wore white gloves but were even asked, by embarrassed engineers, when their menstrual periods were due. True or false, the popular belief that women’s hands tend to perspire more during their periods caused concern. The Kellex team could not take the risk of questioning the scientific basis of the legend. Hence charts were prepared on which, next to the name and shift of the girl, there was a column carrying the date of her period. On those days, she would be switched to another job.

I find it extremely curious that testing this hypothesis was something that no one thought could be accomplished and find this anecdote a useful reminder that many conceptual frameworks have meaningful limits at some margin.

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