Simply defined an “anchor price” is a price that we store in our mind as a fair price for an item. There are lots of things that contribute to how we determine an anchor price. In fact books have been written about pricing. Priceless: The Myth of Fair Value (and How to Take Advantage of It)
Basically vendors want to set your anchor price as high as possible while as a consumer you want to have a lower price anchor. For example you might see a shirt in a store priced at $20 marked down from $40. The store is trying to set your anchor price at $40. If that happens then buying the shirt at $20 seems like a good deals since you are getting it for half off. However if you had seen the same shirt on sale for $15 at another store recently then your anchor price would be set at $15 and $20 would seem overpriced. You may consider all shirts to have pretty much the same value in which case your anchor price would be a few bucks that you can buy a shirt for at a thrift store or at a garage sale. Your anchor price would then be so low that you probably would never buy a shirt at retail.
Another example is a book might say that it will teach you how to get a free airline ticket worth $250. If the book sells for $50 it would seem like a bargain. You would feel like you are getting $250 in value for just $50. However, if you knew that similar books sell for as little as $10 or that the information on how to get a free airline ticket is available for free on the internet then $50 seems like to high of a price. You can see that knowing the fair value of an item can save you a lot of money.
A good way to make sure you are not misled by anchor pricing is to know the value of a product before you buy it. This is why many people keep price books for commonly purchased items. That way you know if an item on sale is really a bargain. If you are not sure about the value of an item do some research. If the item is uncommon then you should try to compare it to other items that provide a similar benefit. Don’t just accept the seller’s price as the value of an item, find out for yourself what the item is worth. This is one more way to be frugal.
